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TMI Blog2016 (9) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... HESE1 who had also parted with his monies. The amount so determined shall be refunded by the bank to the 7th respondent within two weeks from the date of receipt of a copy of this order by way of a pay order/bankers cheque. The writ petition is accordingly allowed setting aside the order passed by the Debts Recovery Tribunal, Visakhapatnam. We further hold that the sale held by the Indian Overseas Bank on 15.07.2015 was illegal, being in utter violation of the statutory mandate of Rules 8 and 9 of the Rules of 2002. All steps taken by the bank pursuant to the said illegal sale are also set aside. - WRIT PETITION No.33614 of 2015 - - - Dated:- 15-7-2016 - SRI SANJAY KUMAR AND DR. B.SIVA SANKARA RAO, JJ For The Petitioner : Sri Chavali Ramanand For The Respondent : Sri K.Suryanarayana ORDER (per Honble Sri Justice Sanjay Kumar) The petitioner calls in question the order dated 15.09.2015 passed by the Debts Recovery Tribunal, Visakhapatnam, in S.A.No.201 of 2015. Consequently, he seeks an order allowing S.A.No.201 of 2015 and setting aside the proceedings initiated by the Indian Overseas Bank (hereinafter, the bank) under the provisions of the Securitisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e loan availed by the 2nd respondent company from the bank and is therefore a borrower', as defined under Section 2(1)(f) of the SARFAESI Act. The said loan account was classified as a non-performing asset and the bank issued a demand notice under Section 13(2) of the SARFAESI Act on 14.05.2014. Thereunder, the total outstanding dues as on 31.03.2014 aggregating to ₹ 2,50,74,745/-, with further interest at 13% with monthly rests, were directed to be paid within sixty days. Upon non-compliance, the bank initiated proceedings under Section 13(4) of the SARFAESI Act by issuing possession notice dated 10.09.2014 in terms of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 (hereinafter, the Rules of 2002). It appears that the bank then initiated auction sale proceedings which did not fructify. Thereafter, sale notice dated 29.05.2015 was issued by the bank in terms of Rule 8(6) of the Rules of 2002 [wrongly mentioned as Rule 8(5)] informing the borrowers that the secured assets would be put to sale on 01.07.2015. This sale notice was also published in Eenadu Telugu Newspaper and Hindu English Newspaper on 30.05.2015. It is however an admitted fact that the propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale was confirmed in favour of the highest bidder on 16.07.2015 at 10.57 A.M. The auction purchaser, the 7th respondent herein, was stated to have paid 15% of the bid amount on 16.07.2015. 10% of the bid amount was paid by the 7th respondent by way of the earnest money deposit on 29.06.2015 itself. The balance 75% of the bid amount, being ₹ 1,89,84,750/-, was deposited by the 7th respondent on 11.08.2015, as extension of time was sought by it under letter dated 29.07.2015 and the bank granted extension till 12.08.2015 under its letter dated 29.07.2015. This being the factual position, the question before us is whether the procedure followed by the bank is in accordance with the statutory mandate of the SARFAESI Act and the Rules of 2002. This issue is no longer res integra. In MATHEW VARGHESE V/s. M.AMRITHA KUMAR , this very issue fell for consideration. That was a case where after issuance of the sale notice dated 14.08.2007 under Rule 8(6) of the Rules of 2002 and the newspaper publication on 23.08.2007 under Rule 9(1) of the Rules of 2002, the sale proposed to be held thereunder on 25.09.2007 did not materialize owing to the Debts Recovery Tribunals order and sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale proposed to be held on a particular date does not materialize, for reasons not solely attributable to the borrower, the secured creditor would have to start afresh from the stage of issuing a sale notice under Rule 8(6) of the Rules of 2002. As in that case the bank had effected the sale on 28.12.2007 by accepting the tender of the bidder straight away and went about confirming the sale thereafter, the Supreme Court condemned the whole procedure followed by the bank and the ultimate confirmation of the sale was also held to be vitiated as it was not in conformity with the provisions of the SARFAESI Act and the Rules framed thereunder. This was the result, notwithstanding the fact that the bank had already confirmed the sale and had transferred the asset to the bidder. It is however contended by Sri G.Rama Gopal, learned counsel for the 7th respondent/auction purchaser, that postponing of the auction sale scheduled on 01.07.2015 to 15.07.2015 would be permissible even as per the law laid down in MATHEW VARGHESE1. He would place reliance in this regard on para 52 of the judgment which reads as under: 52. Keeping the said basic principle in applying the above provisions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 Rule 9(1) has to be necessarily followed, inasmuch as that is the prescripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed after an auction sale. Rule 9(3) mandates that upon the sale of immovable property, the purchaser shall immediately make the deposit of 25% of the sale price with the Authorised Officer and in default of such deposit the property shall forthwith be sold again. Rule 9(4) of the Rules of 2002 mandates that the balance amount of the purchase price shall be paid to the Authorised Officer on or before the 15th day of the confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. In the present case, the bank admits that the sale was held on 15.07.2015 but strangely goes on to state that confirmation thereof took place on the next day, i.e., 16.07.2015. This methodology was itself alien to the procedure contemplated under Rule 9 of the Rules of 2002. The provision clearly and categorically posits that the purchaser must immediately pay 25% of the sale price on the day of the sale itself. Further, if the balance purchase price is not paid on or before the 15th day from the confirmation of the sale, time can only be extended as agreed upon in writing by the parties. According to the bank, the 7th respondent/auction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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