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TMI Blog2013 (9) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... FAESI Act lays down the detailed and comprehensive procedure for enforcement of security interest created in favour of a secured creditor without intervention of the court or tribunal - Section 13(2) required the secured creditor to issue notice to the borrower in writing to discharge his liabilities within 60 days from the date of the notice - Such notice must indicate that if the borrower failed to discharge his liabilities, the secured creditor shall be entitled to exercise its rights in terms of Section 13(4) - A reading of sub-rule (1) of Rule 9 makes it manifest that the provision was mandatory - As regarded balance amount of purchase price, sub-rule (4) provided that the said amount shall be paid by the purchaser on or before the fifteenth day of confirmation of sale of immovable property or such extended period as may be agreed upon in writing between the parties - The period of fifteen days in Rule 9(4) was not that sacrosanct and it was extendable if there was a written agreement between the parties for such extension. There was no doubt that Rule 9(1) is mandatory but this provision was definitely for the benefit of the borrower - Similarly, Rule 9(3) and Rule 9(4) we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mortgaged property valued which was fixed at Rs.9,00,000/-. 6. On 18.12.2005, the Bank published the auction notice in the local newspapers. The conditions of the public notice were also mentioned in the auction notice. 7. Bashir Ahmed (appellant in two appeals and respondent no.3 in the appeals of the Bank), who we shall refer to hereafter as "auction purchaser" made the payment of Rs.90,000/- towards earnest money deposit on 18.12.2005 itself. The public auction was conducted on 11.01.2006. The auction purchaser gave the bid of Rs.8,50,000/- which was accepted being the highest bid. The auction purchaser made payment of Rs.1,45,000/- towards 25% of the sale consideration. However, he did not make the payment of remaining 75% within 15 days of the confirmation of sale in his favour. He made the payment towards balance sale price in installments on various dates and the final payment was made on 13.11.2006. On 16.11.2006, the Bank issued the sale certificate in favour of the auction purchaser. 8. The proceeds from the sale of the mortgaged property fell short of the total outstanding amount against the borrower. As on 09.02.2007, Rs.2,27,000/- remained outstanding against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Section 13(2) was given by the Bank to the borrower on 30.06.2005. That the Bank proceeded for the enforcement of security interest in one of the modes provided under Section 13(4) is also not in dispute. The borrower in the writ petitions filed before the Karnataka High Court set up the plea that there was non- compliance of Rule 9 and that had rendered the sale in favour of the auction purchaser bad in law. The Single Judge and the Division Bench were convinced by the borrower's contention. We are required to see the correctness of that view. 16. 2002 Rules have been framed by the Central Government in exercise of the powers conferred on it by sub-section (1) and clause (b) of sub-section (2) of Section 38 read with sub-sections (4), (10) and (12) of Section 13 of the SARFAESI Act. 17. Rule 9* provides for the detailed procedure with regard to sale of immovable property including issuance of sale certificate and delivery of possession. Sub-rule (1) of Rule 9 states that no sale of immovable property shall take place before the expiry of 30 days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is the meaning of the expression 'written agreement between the parties' in Rule 9(4)? 2002 Rules do not prescribe any particular form for such agreement except that it must be in writing. The use of term 'written agreement' means a mutual understanding or an arrangement about relative rights and duties by the parties. For the purposes of Rule 9(4), the expression "written agreement" means nothing more than a manifestation of mutual assent in writing. The word 'parties' for the purposes of Rule 9(4) we think must mean the secured creditor, borrower and auction purchaser. 19. On behalf of the borrower, the following non-compliances were brought forth: (i) the auction notice of sale was published on 18.12.2005 under Rule 9(1). The public auction should have been conducted not before 30 days therefrom, i.e., it must have been conducted on or after 17.01.2006 but the public auction in fact was conducted on 11.01.2006; (ii) 25% of the sale price from the auction purchaser should have been collected on the day of confirmation of sale in his favour, i.e., on 11.01.2006 but instead Rs. 90,000/- were adjusted which he deposited as earnest money deposit and a sum of Rs.1,45,000/- was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchaser made the payment of the balance purchase price forthwith on that day, i.e., 13.11.2006. This indicates that he was impliedly a party to the written agreement between the Bank and the borrower. In the circumstances, there is no reason why the condition in Rule 9(4) viz. "such extended period as may be agreed upon in writing between the parties" be not treated as substantially satisfied. The learned Single Judge was clearly in error in holding that the letter dated 13.11.2006 written by the borrower to the Bank cannot be construed as written agreement falling under Rule 9(4). 23. There is no doubt that Rule 9(1) is mandatory but this provision is definitely for the benefit of the borrower. Similarly, Rule 9(3) and Rule 9(4) are for the benefit of the secured creditor (or in any case for the benefit of the borrower). It is settled position in law that even if a provision is mandatory, it can always be waived by a party (or parties) for whose benefit such provision has been made. The provision in Rule 9(1) being for the benefit of the borrower and the provisions contained in Rule 9(3) and Rule 9(4) being for the benefit of the secured creditor (or for that matter for the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... official position and petitioner has been deprived of his property in the manner not known to law. There is violation of Article 21 of the Constitution of India. The petitioner has been deprived of his shelter. The right to livelihood is an integral facet of the right to life under Article 21 of the Constitution, (Narendra Kumar Vs. State of Haryana), (1994) 4 SCC 460. Therefore, the submission of learned counsel for respondents II to IV that petitioner should have availed alternate remedy cannot be accepted." 29. The learned Division Bench in this regard observed thus : "14. Though the petitioner could agitate these matters in an appeal filed under Section 17 of the Act, it is settled law that when a Constitutional right of an individual is affected by statutory authorities by trampling upon the mandatory requirements of law, this court cannot be a silent spectator. It becomes not only a right, but the duty of this court to interfere and strike at these illegal activities and uphold the Constitutional right of a citizen of this country. Therefore, the learned Single Judge rightly interfered with these illegal acts of statutory authorities in its jurisdiction under Article 226 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance." 31. No doubt an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but by now it is well settled that where a statute provides efficacious and adequate remedy, the High Court will do well in not entertaining a petition under Article 226. On misplaced considerations, statutory procedures cannot be allowed to be circumvented. 32. If the facts of the present case are seen, it is apparent that the borrower had been chronic defaulter in repayment of the loan amount. Before issuance of notice under Section 13(2) on 30.06.2005 a demand notice was given by the Bank to the borrower on 16.02.2005 calling upon him to pay the outstanding loan amount but he did not comply with that notice. Thereafter, 13(2) notice was given to him on 30.06.2005 but h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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