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2017 DIGILAW 543 (KAR)

K. Sunder Babu v. Union of India

2017-03-03

A.S.BOPANNA

body2017
ORDER : A.S. Bopanna, J. The petitioner is before this Court assailing the sale notice dated 7.11.2016 in relation to the petition schedule property, registered on 18.11.2016 as at Annexure-A to the petition and is seeking that the same be quashed. 2. The fact that the petitioner being the owner of the petition schedule property and the other properties, had created charge on the same in favour of the respondent No.3 in view of the financial assistance secured is not in dispute. The fact that the amount was due and payable and in order to recover the same, action was initiated also cannot be in dispute. The said process of recovery was assigned by respondent No.3 to respondent No.4 in terms of the provisions contained in The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act-for short). Respondent No.4 thereafter initiated proceedings for recovery of the amount by bringing the security interest to sale in terms of The Security Interest (Enforcement) Rules, 2002 ('Rules 2002-for short). 3. In the said process, respondent No. 4 got issued a public auction sale notice dated 10.9.2016 where under all the properties over which charge was created was brought to sale. The petition schedule property was shown as property No.2 in the sale notice and the reserve price was fixed at Rs.5.70 crores. Through the auction conducted the property is sold under the impugned sale certificate dated 7.11.2016 for the said amount of Rs.5.70 crores which is same as the reserve price that was fixed. The petitioner who is therefore aggrieved is before this Court in this petition. 4. The contention urged herein is two-fold. Firstly it is contended that the sale is to be conducted by the authorised officer in terms of Rule 8(5) of he Rules, 2002 but the sale conducted in the instant case is not by an 'authorised officer-and as such the sale is void. In that regard, reference is made to Rule 2(a) of the Rules, 2002 to point out the definition of the term 'authorised officer-as contained therein. In that light, it is contended that the person who conducted the sale in the instant case is not appointed in terms of what is contained in the said provision. In that regard, reference is made to Rule 2(a) of the Rules, 2002 to point out the definition of the term 'authorised officer-as contained therein. In that light, it is contended that the person who conducted the sale in the instant case is not appointed in terms of what is contained in the said provision. Secondly it is contended that the confirmation of the sale made is in violation of Rule 9(2) of Rules, 2002 as the sale has been confirmed for the same price which was indicated as the reserve price but the consent of the borrower has not been obtained as required under the said provision. The said contentions are countered by the learned senior counsel for the respondents. 5. Since these are the only contentions urged in this petition with reference to the provisions in the Rules, 2002, it is appropriate to extract the relevant rules on which reliance is placed. They read as hereunder; '2. Definitions :- In these rules, unless the context otherwise requires,- (a) ' authorised officer' means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the [Act]; 9. Time of sale, issue of sale certificate and delivery of possession, etc.- (1) xxxxx (2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer and shall be subject to confirmation by the secured creditor. Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of Rule 8. Provided further that if the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price. 6. Provided further that if the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price. 6. Sri Sunil Rao, learned counsel for the petitioner with reference to Rule 2(a) of the Rules, 2002 would contend that the Authorised officer is not appointed by the bank in terms thereof and even if he is considered to be the officer of respondent No.4, even then he is not of the same grade as is required under the provision. 7. Sri B. M. Shyamprasad, learned senior counsel for the respondent would refer to the provision contained in Section 5 of SARFAESI Act where under a provision is made for the reconstruction company to acquire financial assets of any bank or financial institution. In that light, when respondent No. 4 herein has secured assignment/acquired the financial assets from respondent No.3 bank and thereafter when respondent No.4 has brought the properties to sale, the question of the bank having control over the sale and for that purpose the bank appointing the authorised officer would not arise. The respondent No.4 in that light has contended that the person who has conducted the sale issued the sale certificate is the officer authorised by respondent No.4. 8. In that circumstance, in the background of the contentions put forth, when the assignment made by respondent No.2 and the acquisition of the secured assets by respondent No.4 is not found to be contrary to law nor when there is no other material in that regard, the appointment of the Authorised officer by the bank would not arise. In that circumstance, when the officer authorised by the respondent No.4 has conducted the sale proceedings and executed the sale certificate, the same cannot be held to be contrary to law. 9. Insofar as the contention relating to the proviso contained in Rule 9(2) of the Rules, 2002 being contravened as contended by the learned counsel for the petitioner, the perusal of the Rule would indicate that when reserve price is fixed in respect of the secured asset and when the purchaser quotes a price over and above the reserve price, there is no ambiguity with regard to the procedure to be followed in accepting such offer. Further if the offer made is less than the reserve price, the Authorised officer cannot accept the offer without the consent of the borrower which is also the unambiguous position. The question raised is however about the procedure that is to be followed if the price offered is the same as the reserve price. In the instant facts, the reserve price fixed is Rs. 5.70 crores and the price offered by the respondent No.5 is also Rs.5.70 crores for which the sale certificate has been issued. 10. The learned counsel for the petitioner in order to contend that the offer in such circumstance cannot be accepted without the consent of the borrower has relied on the decision of the Hon'ble Division Bench of the High Court of Judicature at Madras in the case of K. Raamaselvam and two others v. Indian Overseas Bank and another ( AIR 2010 Mad. 93 ) wherein the Court after categorizing three circumstances in Rule 9(2) has arrived at the conclusion that when the bid offered was the same as the reserve price, the sale could be confirmed only with the consent of the borrower and the secured creditor. Another decision of the Division Bench of the High Court of Judicature at Madras in the case of A. Varalakshmi v. The Chief Manager, Punjab National Bank and another ( 2012 (3) LW 661 ) wherein reliance is placed to the case of K. Raamaselvam (supra) is also relied on by the learned counsel for the petitioner. The said case had arisen under a different circumstance where the price offered was less than the reserve price and the transaction was finalized by a private treaty without the consent of the borrower, the same was disapproved. 11. The learned senior counsel for the respondents on the other hand has referred to the decision of the Kerala High Court in the case of Vergeese Ukken v. State Bank of India (AIR 2011 Ker 41) wherein the learned single Judge after referring to the decision in the case of K. Raamaselvam ( AIR 2010 Mad 93 ) (supra) has distinguished the same and arrived at a different conclusion. 12. 12. Having perused the decision in the case of Vergeese Ukken (AIR 2011 Ker 41) (supra), I feel persuaded to accept the conclusion reached therein rather than the view taken in the case of K. Raamaselvan, ( AIR 2010 Mad 93 ) I am of the said opinion for the reason that a perusal of two provisos to sub-rule (2) to Rule 9 of the Rules, 2002 will clearly disclose that only two situations are envisaged. There is no third category as assumed in K. Raamaselvam-s case. The only two categories are (i) when the price offered is more than the reserve price, which will include the figure of the reserve price fixed (ii) when the price offered is less than the reserve price fixed. Another additional category cannot be read into the Rule as otherwise it will lead to absurdity. 13. If looked at from that view point, there would be no difficulty in understanding the contents of the Rule that if the price quoted is the same as the reserve price or higher than that price, the sale could be confirmed in favour of he highest bidder. Obviously if there are more than one bidder certainly the highest bidder will not offer the same price, as that of the reserve price and as such the Rule is worded in that fashion. But if the highest bidder offers the same price as that of the reserve price, there would be no impediment for the authorised officer to confirm the sale in favour of such bidder. The fact proviso on the other hand makes it clear that the sale cannot be confirmed by the authorised officer if the price offered is less than the reserve price. The words ' provided further-employed in the second proviso to sub-rule (2) of Rule 9 will make it clear that it is an exception made to the first proviso by enabling the authorised officer to confirm the sale even when the price offered is less than the reserve price, but that is made possible only if the borrower and the secured creditor who is the owner of such secured asset consents to effect the sale at such price. 14. In the above backdrop, as noticed, in the instant facts, the price offered by respondent No. 5 is same as the amount indicated as the reserve price. 14. In the above backdrop, as noticed, in the instant facts, the price offered by respondent No. 5 is same as the amount indicated as the reserve price. Hence, the contingency as envisaged in the proviso to Rule 9(2) of Rules, 2002 did not arise and the consent of the borrower was not required. In that view the contentions based on which the sale certificate is assailed in this petition is without basis. Hence for all the afore stated reasons, the petition being devoid of merit stands dismissed without any order as to costs.