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Allahabad High Court · body

2016 DIGILAW 1516 (ALL)

State Bank of India v. Vimla Devi

2016-04-22

V.K.MATHUR

body2016
JUDGMENT : V.K. Mathur, Chairperson. This Appeal has been preferred by the Appellant-Bank under Section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "The SRFAESI Act") against the order dated 8th May, 2015 passed by the learned DRT, Allahabad, wherein the Securitization Application No. 87 of 2015 filed by the Respondent Nos. 1 and 2-borrowers was allowed and the auction sale conducted by the Appellant-Bank in favour of the Respondent No. 3-auction purchaser was quashed. It was further directed that the borrowers to deposit the entire sum due along with interest and all expenses and charges within fifteen days and the Appellant-Bank was to refund the amount deposited by the Respondent No. 3-auction purchaser within fifteen days. 2. The brief facts for adjudication of the present case are that the Appellant-Bank granted certain credit facilities to the Respondent Nos. 1 and 2 and the said Respondents mortgaged their property by depositing the original title deed standing in their name. The loan account of the Respondent Nos. 1 and 2 was declared as non-performing asset by the Appellant-Bank. The Appellant-Bank issued a demand notice under Section 13(2) of the SRFAESI Act on 19th March, 2008 for a sum of Rs. 4,75,671.99 with future interest. 3. The Appellant-Bank has further stated that the notice under Section 13(4) of the SRFAESI Act was issued by the Appellant-Bank on 14th August, 2009 and the sale notice was published in two newspapers on 10th February, 2015 scheduling the auction of the property in question on 14th March, 2015. The Respondent Nos. 1 and 2 preferred the securitization application under Section 17 of the SRFAESI Act before the DRT below challenging the auction sale process which was allowed and the auction sale conducted by the Appellant-Bank was set aside vide the impugned order dated 8th May, 2015. Being aggrieved by the said impugned order, the Appellant-Bank has filed the present Appeal before this Tribunal under Section 18 of the SRFAESI Act. 4. Learned Counsel for the Appellant Bank argued that the Learned Tribunal below has erred in setting aside the auction sale of the mortgaged property of the borrowers Respondent Nos. 1 and 2 on the ground of non-compliance of Rules 8 (6) and 8(7) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'Rules'). 4. Learned Counsel for the Appellant Bank argued that the Learned Tribunal below has erred in setting aside the auction sale of the mortgaged property of the borrowers Respondent Nos. 1 and 2 on the ground of non-compliance of Rules 8 (6) and 8(7) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'Rules'). It was contended that the Rule 8 (6) of the Rules was complied by serving the notice on the Respondent No. 1 which is sufficient notice on the borrowers-Respondent Nos. 1 and 2. The sale notice was published in two newspapers on 10th February, 2015 in furtherance of which the auction sale of the property was effected on 14th March, 2015 in favour of the Respondent No. 3. It was also submitted that the sale notice was affixed on the conspicuous part of the property in question. It was prayed that the impugned order dated 8th May, 2015 setting aside the auction sale be quashed. 5. Learned Counsel for the Respondent Nos. 1 and 2-borrowers submitted that the Learned Tribunal below has rightly set aside the auction sale of the mortgaged property in view of non-compliance of mandatory provisions of Rules 8(6) and 8(7) of the 'Rules'. It was submitted that the sale notice under Rule 8(6) was not served individually on both the borrowers and there is no evidence that the sale notice was affixed on the conspicuous part of the immovable property which clearly vitiates the auction sale. 6. The Respondent No. 3 Kripa Shankar Singh-auction purchaser has reiterated the submissions of the learned Counsel for the Appellant-Bank. It was submitted that the Respondent No. 3 is a bona fide purchaser and the impugned order be set aside. 7. Heard the learned Counsels for the parties and perused the record of the case. 8. In the present case, the Appellant-Bank issued the demand notice under Section 13(2) of the SRFAESI Act on 19th March, 2008 for a sum of Rs. 4,75,671.99 with future interest. The possession notice under Section 13(4) of the SRFAESI Act was issued by the Appellant on 14th August, 2009. Thereafter, the Bank published the auction notice in two newspapers on 10th February, 2015 by fixing the date 14th March, 2015 for auction. 9. 4,75,671.99 with future interest. The possession notice under Section 13(4) of the SRFAESI Act was issued by the Appellant on 14th August, 2009. Thereafter, the Bank published the auction notice in two newspapers on 10th February, 2015 by fixing the date 14th March, 2015 for auction. 9. The main contention of the learned Counsel for the Appellant-Bank is that the Appellant had complied with the mandatory provisions of Rules 8(6) and 8(7) of the 'Rules' and the learned DRT had erred in setting aside the auction sale on the ground of non-compliance of Rules 8(6) and 8(7) of the 'Rules'. 10. It is relevant to quote the Rule 8(6) and 8(7) of the Security Interest (Enforcement) Rules, 2002 which are as under:- "Rule 8(6) - The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5); Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers; one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,- (a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) The secured debt for recovery of which the property is to be sold; (c) Reserve price, below which the property may not be sold; (d) Time and place of public auction or the time after which sale by any other mode shall be completed; (e) Depositing earnest money as may be stipulated by the secured creditor; (f) Any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property. Rule 8(7) - Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorised officer deems it fit, put on the web-site of the secured creditor on the Internet." 11. Rule 8(7) - Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorised officer deems it fit, put on the web-site of the secured creditor on the Internet." 11. It is pertinent to note that the notice under Rule 8(6) of the 'Rules' was sent on 9th February, 2015 by registered post to the Respondent No. 1-Smt Vimla Devi and Respondent No. 2-Anil Kumar, who are the borrowers, in one common envelope, since they are husband and wife, as has been admitted by the Appellant-Bank in reply. The Appellant-Bank has filed the photocopy of the registered letter dispatch entry (Annexure No. R/6) which is No. 10 dated 9th February, 2015 and is only in the name of Vimla Devi, Respondent No. 1. In this respect, Hon'ble Supreme Court has held in Mathew Varghese v. M. Amritha Kumar, (2014) 5 S.C.C. 610 that Rule 8 (6) contemplates individual notice to the borrower as held in para 31 which is as under :- "31.........Sub-rule (6) of Rule 8 again states that the authorised 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 SRFAESI Act," 12. Thus, in view of the law laid down in Mathew Varghesev. 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 SRFAESI Act," 12. Thus, in view of the law laid down in Mathew Varghesev. M. Amritha Kumar (supra), the present case since individual notice of 30 days for the sale of immovable property was not served to the Respondent No. 2-Anil Kumar borrower, as admitted by the Appellant Bank, as contemplated under Rule 8 (6) which is mandatory. Thus, there is clearly non-compliance of Rule 8(6) of the 'Rules'. 13. In the present case, regarding affixation of notice of sale shown from the photograph (Annexure R/7), the Bank has not given any specific details that the sale notice was affixed on the conspicuous part of the mortgaged property. In my considered view, the mere exhibiting a photograph is not sufficient compliance of Rule 8(7). Thus, the sale was conducted without compliance of Rule 8(7) of the 'Rules'. 14. In view of the above discussion, in the present case, there is non-compliance of mandatory Rule 8(6) and 8(7) of the Security Interest (Enforcement) Rules, 2002. As such the auction sale by the Appellant-Bank in violation of these mandatory requirements is invalid. 15. Thus, there is no illegality in the impugned order dated 8th May, 2015 passed by the learned DRT, Allahabad setting aside the auction sale. 16. Consequently, there is no merit in the present Appeal which is dismissed with no order as to costs.