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TMI Blog2018 (6) TMI 1840X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.09.2017. The contention of the petitioners in this regard is therefore without merit and is accordingly rejected. As regards the alleged failure on the part of the bank to consider the representation dated 01.09.2017 made by the petitioner firm, it appears that the only plea advanced thereunder was to extend time till 31.10.2017 to regularize the accounts. Even though the symbolic possession notice, under Section 13(4) of the SARFAESI Act read with Rule 8(1) of the Rules of 2002, was issued shortly thereafter on 11.09.2017, the bank did not take any concrete measures till 01.03.2018, when it issued the notice under Rule 8(6) of 2002. The petitioners did not establish before this Court that any substantial payment was made by them before the end of October 2017 as promised by them. The bank specifically stated in its counter that the petitioners made no such payment to establish their bonafides and the said averment remains unrebutted. However, given the clear violation of the statutory mandate of Rules 8(6) and 9(1) of the Rules of 2002 in the context of the amended Section 13(8) of the SARFAESI Act, the action of the bank in bringing the secured assets of the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard were referred to by the Supreme Court in its recent judgment in Agarwal Tracom Pvt. Ltd. v. Punjab National Bank [(2018) 1 SCC 626]. Each case would turn upon its own individual facts. In the case on hand, we find that the impugned sale notice does not satisfy the requirements of the amended provisions of the SARFAESI Act and the Rules made thereunder. A notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 (for short, 'the Rules of 2002'), was issued by the bank on 01.03.2018. A notice under Rule 9 of the Rules of 2002, bearing the same date, was also communicated to the petitioners informing them that the date of auction was fixed as 03.04.2018. We are informed that this notice under Rule 9 of the Rules of 2002 was published in the newspapers on 03.03.2018. In terms of the amended provisions of Section 13(8) of the SARFAESI Act, the right of redemption given to the borrower would expire upon publication of such a notice. However, Rule 8(6) of the Rules of 2002, as interpreted by the Supreme Court in Mathew Varghese v. M. Amritha Kumar [(2014) 5 SCC 610], stipulates that the thirty day notice period mentioned therein is for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The petitioner firm availed a term loan along with overdraft facilities to the tune of Rs. 30,00,000/- and Rs. 40,00,000/- respectively from the bank in the year 2015. These accounts became irregular and were classified as non-performing assets by the bank on 31.03.2017, leading to a demand notice being issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter, 'the SARFAESI Act') on 11.07.2017. The petitioners claim that this demand notice was received by them on 17.07.2017 and thereupon, a representation was made to the bank on 01.09.2017 requesting it either to reschedule or to postpone the action proposed to be taken as they were making efforts to regularize the loan accounts if time was extended up to 31.10.2017. The petitioners allege that even before expiry of the sixty days stipulated in the demand notice dated 11.07.2017 and without considering the representation dated 01.09.2017, the bank issued possession notice dated 11.09.2017 under Rule 8(1) of the Rules of 2002. The petitioners further contend that despite part-payment of the outstanding dues, the bank issued the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured creditor, such as the bank, seeks to exercise such power in violation of the mandatory procedure. Be it noted that a secured creditor, by virtue of the powers created by and vesting in it under the SARFAESI Act, is empowered to dispense with the ordinary legal process of taking recourse to the competent civil Court for foreclosure and unilaterally bring the secured/mortgaged assets to sale by simply adhering to the procedure prescribed thereunder. In the event a secured creditor fails to follow such binding procedure, it would adversely impact the borrower's right to property under Article 300A of the Constitution. Therefore, notwithstanding the fact that the writ petitioners did not specifically raise a ground in this regard, this Court is entitled, nay, bound to examine as to whether the bank followed the due procedure while issuing the notices in question. Merely because sufficient pleading is not put forth is no ground for a Constitutional Court to condone or turn a blind eye to patent illegality. 7. In this regard, it may be noted that certain amendments were made to the SARFAESI Act and the Rules of 2002 in recent times. Act No. 44 of 2016 brought in certain am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No sale of immovable property under these rules, in first instance shall take place before the expiry of thirty 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) of rule 8 or notice of sale has been served to the borrower. Provided further that if sale of immovable property by any one of the methods specified by sub-rule (5) of rule 8 fails and sale is required to be conducted again, the authorized officer shall serve, affix and publish notice of sale of not less than fifteen days to the borrower, for any subsequent sale. ' 10. In the light of the aforestated changes in the statutory scheme, certain crucial aspects may be noted. As per the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the 'sale or transfer' of such secured asset. Case law consistently held to the effect that a 'sale or transfer' is not completed until all the formalities are completed and there is an effective transfer of the asset sold. In consequence, the borrower's right of redemption did not stand terminated on the date of the auction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orized officer should serve to the borrower a notice of 30 days for the sale of the immovable secured assets. Reading sub-rule (6) of Rule 8 and sub-rule (1) of Rule 9 together, the service of individual notice to the borrower, specifying clear 30 days' time-gap for effecting any sale of immovable secured asset is a statutory mandate. It is also stipulated that no sale should be effected before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers. Therefore, the requirement under Rule 8(6) and Rule 9(1) contemplates a clear 30 days' individual notice to the borrower and also a public notice by way of publication in the newspapers. In other words, while the publication in newspaper should provide for 30 days' clear notice, since Rule 9(1) also states that such notice of sale is to be in accordance with the proviso to sub-rule (6) of Rule 8, 30 days' clear notice to the borrower should also be ensured as stipulated under Rule 8(6) as well. Therefore, the use of the expression or in Rule 9(1) should be read as and as that alone would be in consonance with Section 13(8) of the SARFAESI Act. ... 33.1. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction sale notice in newspapers, under Rule 9(1) of the Rules of 2002, was on 03.03.2018. There is, thus, a clear violation of the statutory mandate which vitiates the exercise undertaken by the bank in the context of the aforestated Rules. 15. In so far as the possession notice dated 11.09.2017 is concerned, it may be noted that in terms of Section 13(4) of the SARFAESI Act, it is only if the borrower fails to discharge his liability in full within the period specified in Section 13(2) that a secured creditor is entitled to take recourse to taking possession of the secured asset in terms of Rule 8(1) of the Rules of 2002. Section 13(2) of the SARFAESI Act makes it clear that a secured creditor may require a borrower, by notice in writing, to discharge in full his liabilities to such secured creditor within sixty days from the date of notice, failing which such secured creditor shall be entitled to exercise all or any of the rights under Section 13(4) thereof. It is therefore clear that the sixty day period is to be reckoned from the date of the demand notice under Section 13(2) of the SARFAESI Act and not from the date of service thereof. 16. In the case on hand, the demand ..... 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