Research › Search › Judgment

Calcutta High Court · body

2015 DIGILAW 108 (CAL)

N. Y. Mohammed Ali v. State Bank of India

2015-02-11

NADIRA PATHERYA

body2015
JUDGMENT NADIRA PATHERYA, J. By this writ petition the petitioners seek to set aside the sale notice dated 22nd November, 2013, notice dated 10th August, 2014 and the actions taken thereunder against the properties of the petitioners. The case of the petitioners is that the petitioner No.1 is the borrower of the respondent-Bank. For failure on his part to make payment, proceedings were initiated under the SARFAESI Act, 2002. Notice of sale was issued in November, 2013 initially and thereafter on 22nd March, 2014 and 26th March, 2014 in Sagar and Echo of India, two publications in the Islands as will appear from the affidavit filed by the respondent-Bank. Pursuant to the November notice no sale was held. Therefore, the sale notices in March, 2014 were issued. The sale notices of March, 2014 do not satisfy the mandatory provisions of 30 clear days. In fact, pursuant to the sale notices of March, 2014 no sale was effected and the sale notices lapsed. On 12th May, 2014 an offer was received by the Bank which offer is contrary to the requirements of Rule 8(6) of the 2002 Rules which mandates issuance of 30 clear days’ notice. Clause 3 of the terms and conditions of the sale notice required that earnest money be deposited and in case no earnest money was deposited or the earnest money was not as required the offer would not be considered. In the instant case, the earnest money deposited is less than the amount mentioned in the sale notices; therefore, the authority could not have considered the offer of the purchaser. Two properties belonging to the petitioners were put up for sale. Property no.1 was sold in June, 2014 and property no.2 was sold on 21st July, 2014. As per the requirement of Rule 8(6) of the 2002 Rules the sale notice was served upon the borrower only on 27th March, 2014 and the sale was effected on 25th April, 2014. Therefore, no clear 30 days’ notice was served on the petitioners. Under Section 14 of the 2002 Act the petitioners had been dispossessed on 9th September, 2013 and although an appeal had been filed from the order passed in proceedings filed under Section 13(2) the same has not been disposed of. The offer made by the purchaser is dated 12th May, 2014 i.e. beyond the time specified in the sale notice of March, 2014. The offer made by the purchaser is dated 12th May, 2014 i.e. beyond the time specified in the sale notice of March, 2014. Clear 30 days’ notice is mandatory and in the absence of such notice the sale is void. In the event no sale for any reason could be held by the secured creditor as per the advertisement given issuance of a fresh notice is mandatory. In case no sale is held by public auction then Rule 8(8) of the 2002 becomes operative and private sale cannot be effected without the consent of the parties. The sale held is contrary to the original terms of payment and although Rule 9(4) of the 2002 Rules postulates payment within 15 days the secured creditor Bank has extended the time for payment without seeking consent of the petitioners. The authorised officer who conducts the sale is the Chief Manager. Instead it has been conducted by the Manager, PBD who is an officer below the rank of Chief Manager. Reliance has been placed on the decision reported in (2014) 5 SCC 610 wherein it has been specifically held by the Supreme Court of India that in the event no sale is held pursuant to the sale notice, the sale notice will be considered to have lapsed and the procedure prescribed will have to be followed afresh. Reliance has also been placed on (2005) 12 SCC 364 for the proposition that the terms and conditions of sale cannot be altered. For the said reasons therefore as the procedure laid down by the statutory rules has not been followed by the respondent-Bank the sale be set aside and all steps taken thereafter be also set aside. In opposing the said application Counsel for the Bank submits that the petitioners are aggrieved by the sale effected and therefore should file an appeal under Section 17 of the 2002 Act. By letter dated 25th July, 2014 the petitioners have accepted the sale as it sought removal of the movables from the premises. Sale in respect of property 1 and property 2 was held in June, 2014 and 21st July, 2014 respectively. The first sale notice was issued in November, 2013 and as a fresh valuation was made therefore the second sale notice was issued. Sale in respect of property 1 and property 2 was held in June, 2014 and 21st July, 2014 respectively. The first sale notice was issued in November, 2013 and as a fresh valuation was made therefore the second sale notice was issued. By 24th April, 2014 all offers were to be received and as no offer was received, as per Clause 11 of the Sale Notice, the sale was postponed to 15th May, 2014. Publication was made on 25th April, 2014 in the Echo of India. As the last date for submission of bid was not specified in the publication dated 25th April, 2014 a corrigendum was issued on 2nd May, 2014. The Bank was authorised to postpone or adjourn the sale pursuant to Clause 11 of the terms and conditions of sale. There is no requirement for issuance of a fresh sale notice. An application for mutation was filed on 4th August, 2014 and mutation effected on 20th August, 2014. Therefore, rights have accrued in favour of the purchaser. No possession of the properties, however, in view of the order dated 20th August, 2014 has been handed over to the purchaser. Section 17 of the 2002 Act is a bar to filing of writ petitions as held in (2003) 3 SCC 524 , (2004) 4 SCC 311 , (2010) 8 SCC 110 , (2009) 8 SCC 366 and (2011) 2 SCC 782 . The Chief Manager of the Bank is the authorised officer who conducted the sale and Rule 9(4) of the 2002 Rules permits the Bank to extend the time to make payment. Therefore, this application merits no order and in view of (2013) 10 SCC 83 be dismissed. In reply, Counsel for the petitioners submits that (2013) 10 SCC 83 has been explained and distinguished in (2014) 9 SCC 660. In view of the decision reported in (1998) 8 SCC 1 the petitioners seek enforcement of their rights guaranteed under Article 300A of the Constitution of India and in view of violation of the principles of natural justice and the sale being conducted contrary to the rules the sale held is without jurisdiction, and alternative remedy is no bar to filing a writ as held in (2014) 5 SCC 610 . Having considered the submissions of the parties, the petitioner No.1 was a borrower and for non-payment of his dues proceedings were initiated under the 2002 Act. Having considered the submissions of the parties, the petitioner No.1 was a borrower and for non-payment of his dues proceedings were initiated under the 2002 Act. Possession was taken in September, 2013 and thereafter steps taken for sale of two of the immovable properties of the petitioners. In this regard, a sale notice was issued in November, 2013 after valuation was effected. No offer was received. Therefore, the properties were re-valued and a sale notice dated 15th March, 2014 was published in the Dailies of the Islands viz. Sagar on 22nd March, 2014 and the Echo of India on 26th March, 2014. Rule 8(6) of the 2002 Rules mandates service on the borrower of a 30 days’ clear sale notice. The said notice, according to the petitioners, was received by them on 27th March, 2014 while the sale was to be held on 25th April, 2014 as will appear from the publication. Therefore, according to the petitioners, the notice of 30 clear days mandated was not satisfied. Admittedly, till 3 p.m. of 24th April, 2014 no offer was received and therefore the sale could not be effected. It is the action of the Bank taken thereafter which is questionable. What the Bank did was to take recourse to Clause 11 of the terms and conditions of the sale notice, dated 15th March, 2014, published on 22nd March, 2014 and 26th March, 2014 which have been annexed to the affidavit affirmed on behalf of the respondent-Bank. From a reading of Clause 3 of the said sale notice it appears that those offers sent without the earnest money or with deposit below the reserve price would be rejected summarily. Clause 11 of the terms and conditions of the sale notice empowered the authorised officer to accept or reject any bid or adjourn or postpone the tender without assigning any reason and also to modify any terms and conditions of the sale without prior notice. The question of accepting or rejecting the bid did not arise as no offer was received. The authorised officer, however, by a publication made on 25th April, 2014 has postponed the sale to 15th May, 2014. This publication was in continuation of the sale notice of 22nd March, 2014 and 26th March, 2014. The required 30 days’ clear notice was not adhered to by the Bank in the said publication. The authorised officer, however, by a publication made on 25th April, 2014 has postponed the sale to 15th May, 2014. This publication was in continuation of the sale notice of 22nd March, 2014 and 26th March, 2014. The required 30 days’ clear notice was not adhered to by the Bank in the said publication. The last date of submitting offers was also not specified, therefore, a corrigendum was issued on 2nd May, 2014. Rule 8(6) of 2002 Rules came up for consideration in the decision of Mathew Varghese vs. M. Amritha Kumar and Others, (2014) 5 SCC 610 wherein the Supreme Court of India has held as follows:- “53. We, therefore, hold that unless and until a clear 30 days’ notice is given to the borrower, no sale or transfer can be resorted to by a secured creditor. In the event of any such sale properly notified 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 prescription of the law for effecting the sale as has been explained in detail by us in the earlier paragraphs by referring to Sections 13(1), 13(8) and 37, read along with Section 29 and Rule 15. In our considered view any other construction will be doing violence to the provisions of the SARFAESI Act, in particular Sections 13(1) and (8) of the said Act.” Therefore, if the sale fails the procedure is to be followed afresh as the notice issued earlier lapsed. In the instant case, the sale initiated by the notice dated 15th March, 2014 published on 22nd March, 2014 and 26th March, 2014 failed. Therefore, a notice afresh was required to be given to the petitioners and the publication of 25th April, 2014 or 2nd May, 2014 could not have been resorted to. Assuming that the Bank was inclined to negotiate privately with the purchaser the same could have been done under Rule 8(8) of the 2002 Rules after taking consent of the parties in writing, such parties being the petitioners and the Bank. This exercise was also not undertaken. Therefore, for lapse on the part of the Bank in following the statutory provisions contemplated by Rule 8(6) of the 2002 Rules the sale effected cannot be supported and is accordingly set aside. As held in (2014) 5 SCC 610 the paramount objective of the 2002 Act is as follows:- “To provide sufficient time and opportunity to the borrower to take all efforts to safeguard his right of ownership either by tendering the dues to the creditor before the date and time of the sale or transfer.” Therefore, the action of the Bank must not be exercised arbitrarily or whimsically to the disadvantage of the borrower. In the instant case, a letter was written to the Bank by the daughter of the petitioners on 25th July, 2014 wherein she had expressed an intent to settle all dues and sought for intimation of the sums payable so that funds could be arranged. It is true that on 21st July, 2014 property 2 was sold and property 1 sold in June, 2014 but possession till date has not been handed over to the purchaser by the Bank. In the writ petition the petitioners have challenged the sale notice dated November, 2013 and the notice dated 10th August, 2014 but the notices published thereafter have been brought on record by the Bank and it is on perusal of such facts that the action of the Bank cannot be supported. In the writ petition the petitioners have challenged the sale notice dated November, 2013 and the notice dated 10th August, 2014 but the notices published thereafter have been brought on record by the Bank and it is on perusal of such facts that the action of the Bank cannot be supported. Counsel for the respondent-Bank has relied on (2013) 10 SCC 83 , (2003) 3 SCC 424, (2004) 4 SCC 311 , (2010) 8 SCC 110 , (2009) 8 SCC 366 and (2011) 2 SCC 782 for the proposition that an alternative remedy will bar filing of the writ petition. The decision reported in (2013) 10 SCC 83 has been explained and distinguished in (2014) 5 SCC 660 . Therefore, the said decision will not apply to the facts of the instant case. In (2014) 5 SCC 610 it has been specifically stated that the SARFAESI Act has been engrafted primarily with a view to protect the rights of the borrower vis-a-vis ownership right which is a Constitutional right protected under Article 300A of the Constitution of India which mandates that no person shall be deprived of his property except by authority of law. Therefore, this writ petition is maintainable especially when procedural illegality is evidently clear. As the sale effected has been set aside, the respondent-Bank is directed to take steps in accordance with law as per the provisions of the 2002 Act and rules framed thereunder. In the event the petitioners approach the Bank for settlement of their dues the same may be considered in accordance with law as the SARFAESI Act aims to protect the rights of a borrower and in case of private negotiation consent of the parties namely, the borrower and the secured creditor is required. At each step notice to the borrower is also contemplated. In view of the aforesaid, this writ petition succeeds and is disposed of. Later: Prayer for Stay made by Counsel for the respondent-Bank is considered and rejected. Let photostat certified copy of this judgment, if applied for, be given to the parties upon compliance of usual formalities.