IN THE HIGH COURT FOR THE STATE OF TELANGANA,
HYDERABAD
****
W.P.No.24960 of 2019 Between:
M/s. Jadala Traders Petitioners VERSUS Andhra Bank, Rep. by its Authorised Officer Warangal Branch, NRR Building Hanumakonda, Warangal & Another.
Respondents JUDGMENT PRONOUNCED ON: 24.11.2021 HON'BLE SRI JUSTICE UJJAL BHUYAN AND HON'BLE DR.JUSTICE CHILLAKUR SUMALATHA
1. Whether Reporters of Local newspapers may be allowed to see the Judgments? : Yes
2. Whether the copies of judgment may be Marked to Law Reporters/Journals? : Yes
3. Whether His Lordship wishes to see the fair copy of the Judgment? : Yes ____________________ UJJAL BHUYAN, J 2 * HON'BLE SRI JUSTICE UJJAL BHUYAN AND HON'BLE DR.JUSTICE CHILLAKUR SUMALATHA + W.P.No.24960 of 2019 % 24.11.2021 # Between:
M/s. Jadala Traders Petitioners VERSUS Andhra Bank, Rep. by its Authorised Officer Warangal Branch, NRR Building Hanumakonda, Warangal & Another.
Respondents ! Counsel for Petitioner : Sri P.Vishnu Vardhan Reddy ^ Counsel for the respondents : Ms. V.Dyumani <GIST:
> HEAD NOTE:
? Cases referred 1 2018 (4) ALD 322 (DB) 2 (2014) 5 SCC 610 3 THE HON'BLE SRI JUSTICE UJJAL BHUYAN AND THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA W.P.No.24960 OF 2019 Order:
(Per Hon'ble Sri Justice Ujjal Bhuyan) Heard Mr. P.Vishnu Vardhan Reddy, learned counsel for the petitioner and Smt. V.Dyumani, learned counsel for the respondent.
2 By filing this writ petition under Article 226 of the Constitution of India, petitioner seeks quashing of sale notice dated 07.10.2019.
3 Case of the petitioner is that it had availed financial assistance to the tune of Rs.6,00,00,000/- as Secured Over Draft Loan (SOD) from the State Bank of India and thereafter from the respondent - Andhra Bank from its KMC Campus branch, Warangal. Because of unavoidable circumstances, there was default by the petitioner in repayment of the loan amount.
4 Respondent-Andhra Bank issued demand notice dated 01.02.2019 under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly referred to hereinafter as the 'SARFAESI Act'), calling upon the petitioner to make payment of the entire amount, which was quantified at Rs.6,28,28,555-00. Petitioner submitted representation 4 (objection) on 03.4.2019, further seeking some time for repayment of the installments. Respondent-Andhra Bank replied, vide letter dated 12.4.2019 stating that the loan account could not be rescheduled.
5 According to the petitioner, respondent-Andhra Bank while issuing the demand notice under Section 13 (2) of the SARFAESI Act, had not taken into consideration the Circular dated 01.01.2019 issued by the Reserve Bank of India. It is stated that as per the said Circular respondent-Andhra Bank had no authority to classify the loan account of the petitioner as Non-Performing Asset (NPA) as on 22.01.2019. 6 Notwithstanding the same, respondent-Andhra Bank, all of a sudden and without issuing any possession notice, directly issued sale notice dated 07.10.2019 fixing e-auction on 15.11.2019.
7 Petitioner has contended that the said sale notice was issued without following any procedure. Respondent-Andhra Bank had not issued possession notice under Section 13 (4) of the SARFAESI Act as well as sale notice under Rule 8 (6) of the Security Interest (Enforcement) Rules, 2002 (briefly, the 'SARFAESI Rules' hereinafter), but directly issued the sale notice dated 07.10.2019.
58 As per the sale notice dated 07.10.2019, the amount due from the petitioner has been shown as Rs.6,28,28,555-00 with interest and expenses.
9 Primary contention of the petitioner is that respondent- Andhra Bank had failed to give sale notices under Rule 8 (6) and Rule 9(1) of the SARFAESI Rules. According to the petitioner a separate 30 days notice has to be given under Rule 8 (6) calling for payment of the entire amount within the aforesaid period, failing which, a separate sale notice under Rule 9 (1) has to be issued fixing the date of auction by giving 30 days gap period and publish the same in two leading newspapers. Impugned notice issued under Rule 8 (6) did not provide 30 days time to the petitioner to pay the entire amount. Without giving such a notice and waiting for 30 days, respondent-Andhra Bank published the sale notice on 07.10.2019 fixing auction sale on 15.11.2019. 10 It is in the above backdrop, the present writ petition has been filed seeking the relief as indicated above. 11 Respondent-Andhra Bank has filed counter affidavit through Sri Nampally Srinivas, Chief Manager of Andhra Bank, Warangal main branch and the authorised officer of the said bank for the KMC Campus branch.
12 At the outset, it is contended that petitioner is having an adequate and efficacious alternative remedy under Section 17 6 of the SARFAESI Act and without exhausting the aforesaid remedy, petitioner has straightaway filed the writ petition. On this ground itself, the writ petition is liable to be dismissed.
13 On merit it is contended that petitioner had availed cash credit limit of Rs.4,00,00,000/- from the State Bank of Hyderabad, Kasibugga branch, Warangal. Petitioner had co- opted M/s. Siddardha Cotton Ginning and Pressing Industry located at Warangal, belonging to Mrs. Sanigarapu Sunitha to manage the activities of the petitioner. Subsequently petitioner approached the respondent Andhra Bank for taking over the limits from State Bank of Hyderabad, offering M/s. Siddardha Cotton Ginning and Pressing Industries as one of the securities for enhancement of the credit limit by Rs.2,00,00,000/-. Cash credit limit of Rs.4,00,00,000/- was taken over by respondent- Andhra Bank along with additional enhancement of Rs.2,00,00,000/- which was sanctioned by the respondent -Andhra Bank, vide sanction letter dated 26.5.2017.
14 It is stated that the loan account of the petitioner was reviewed, whereafter petitioner requested for renewal-cum- conversion of the cash credit limit to SOD due to non- availability of stock and for doing gold business. 7 15 When the petitioner submitted renewal papers along with audited balance sheet, it was observed on 31.3.2017 that the petitioner was mainly engaged in gold trading business; no lease amount was paid to M/s. Siddardha Cotton Ginning and Pressing Industries, besides, there was no stock in the name of M/s. Jadala Traders. It is stated that petitioner had not routed the transactions through the open cash credit account maintained with the respondent-Andhra Bank. Further, M/s. Siddardha Cotton Ginning and Pressing Industries was already a NPA. Petitioner deliberately offered the factory land and building and cotton mill of M/s. Siddardha Cotton Ginning and Pressing Industries as security. Since the loan account of M/s. Siddardha Cotton Ginning and Pressing Industries was already a NPA, petitioner had expressed its inability to mortgage the factory. Statement of accounts revealed that most of the debts in the petitioner's open cash credit account had been transferred to M/s. Siddardha Cotton Ginning and Pressing Industries. 16 On a perusal of the audited balance sheet as on 31.3.2018 it was noticed that Mrs. Sanigarapu Sunitha was one of the partners and that petitioner was engaged in gold business and not in the business of cotton ginning and pressing industry for which the loan was sanctioned. 17 Though respondent-Andhra Bank, on the basis of recommendation of its zonal office, had considered conversion 8 of the open cash credit account to SOD to traders against property which was communicated vide sanction letter dated 25.01.2019, however, due to nonpayment of interest, the loan account was classified as NPA on 31.01.2019. Insofar the claim of the petitioner as Micro, Small and Medium Enterprises (MSME), it is stated that a meeting was held on 22.8.2019 at Andhra Bank Zonal office, Warangal, for revival and rehabilitation of MSMEs.
18 It is further stated that General Manager, District Industries Centre had informed the petitioner that M/s. Siddardha Cotton Ginning and Pressing Industries had availed investment subsidy form the District Industries Centre, but it was not mentioned that M/s. Siddardha Cotton Ginning and Pressing Industries was on lease to M/s. Jadala Traders.
19 When independent external expert had inquired about the stock position for open cash credit liability of Rs.6,00,00,000/-, petitioner informed that the borrower firm (petitioner) was mainly engaged in gold trading business and the purpose for which open cash credit limit was sanctioned to the petitioner i.e. MSME activity was not being carried out by the petitioner. Moreover, the unit taken on lease by M/s.Jadala Traders i.e. M/s. Siddardha Cotton Ginning and Pressing Industries is a NPA with Andhra Pradesh State Finance Corporation. In the circumstances the meeting 9 opined that the relaxation terms applicable to MSME unit for restructuring would not be applicable to M/s.Jadala Traders. 20 Thus petitioner is not functioning or discharging activities of MSME. Such crucial facts were not disclosed to the respondent-Andhra Bank while taking over the loan account. Further, petitioner defaulted in repayment of the open cash credit liability in accordance with agreed terms. As such, respondent-Andhra Bank was constrained to classify the loan account of the petitioner as NPA on 22.01.2019. Consequently, demand notice dated 01.02.2019 was issued to the petitioner for an amount of Rs.6,28,28,555-58 as on 01.02.2019.
21 Petitioner failed to repay the amount as demanded within the statutory period for which respondent - Andhra Bank was constrained to issue possession notice dated 02.5.2019. The said notice was sent to the petitioner - M/s. Jadala Traders by registered post with acknowledgement due. The possession notice was served upon Jadala Srinivas and Jadala Nagarani. When the possession notice sent to the petitioner was returned with the postal endorsement "no such addressee in this address", the same was published in two daily newspapers i.e. The New Indian Express and Namaste Telangana on 04.5.2019. The possession notice was also affixed at the secured asset. Thus there was due compliance 10 of the provisions of the SARFAESI Rules, more particularly, to the provisions of Rule 8 (1) and (2) of the said Rules. 22 Clarifying further, it is stated that respondent-Andhra Bank had issued Rule 8 (6) notice dated 13.6.2019 giving 30 days notice. When the notice sent to the petitioner was returned by the postal authority with the endorsement "no such addressee", respondent - Andhra Bank also published the Rule 8 (6) notice providing for 30 days period. It is stated that there was no response from the petitioner to the Rule 8 (6) notice dated 13.6.2019 issued by the respondent-Andhra Bank. Petitioner had also failed to exercise the right of redemption under Section 13 (8) of the SARFAESI Act. 23 In such circumstances respondent-Andhra Bank was constrained to issue sale notice dated 07.10.2019 fixing date of sale on 15.11.2019. The said sale notice was published in two daily newspapers i.e. Andhra Jyothi and Telangana Today. The sale notice was also affixed at the secured asset. There was thus compliance of the provisions of Rule 8 (6) and Rule 9 (1) of the SARFAESI Rules.
24 Respondent has stated that in response to the sale notice dated 07.10.2019, Smt. G.Saroja had participated in the auction in respect of Item No.2 of the sale notice. She was declared as highest bidder at Rs.1,00,31,30-00 11 whereafter she had deposited 25% of the bid amount including earnest money deposit already paid. 25 Finally, respondent-Andhra Bank has asserted that Andhra Bank has to recover an amount of Rs.6,28,28,555-58 as on 01.02.2019 along with future interest and charges from the petitioner and guarantors. Therefore, respondent seeks dismissal of the writ petition.
26 This Court by order dated 14.11.2019 had issued notice and passed an interim order to the effect that the auction proposed on 15.11.2019 shall go on, but its confirmation should not be done by the respondent till the next date. This order has since been continued from time to time.
27 Learned counsel for the petitioner vehemently argued that the impugned sale notice dated 07.10.2019 cannot be sustained inasmuch as the procedure prescribed under the SARFAESI Rules has not been followed. According to learned counsel for the petitioner without issuing notice under Rule 8 (6) providing for a period of 30 days to the borrower for repayment of the loan amount and without providing for a further period of 30 days under Rule 9 (1) of the SARFAESI Rules, the impugned notice was issued on 07.10.2019. Instead of issuing two notices under the aforesaid provisions each providing for separate 30 days period only one notice 12 was issued on 07.10.2019, which is contrary to law and is thus illegal. In support of the above contention, learned counsel for the petitioner has placed reliance on a Division Bench judgment of this Court in Venshiv Pharma Chem (P) Ltd, Hyderabad Vs. State Bank of India1. Further, he reiterates the contention that petitioner being an MSME it ought to have been given the benefit of Reserve Bank of India Circular dated 01.01.2019 providing for restructuring of financial assistance to MSME sector. Another submission made by learned counsel for the petitioner is that there is under valuation of the schedule property. The reserve price fixed was far below the market value of the schedule property. 28 On the other hand, learned counsel for the respondent, at the outset, submits that for failure of the petitioner to avail the statutory remedy under Section 17 of the SARFAESI Act, the writ petition should be dismissed. Secondly, she submits that there is no violation of the procedure laid down under the SARFAESI Act as well as under the SARFAESI Rules while issuing the impugned sale notice dated 07.10.2019. Referring to Rule 8 (6) and Rule 9 (1), she submits that the mandate of the statute is that 30 days clear notice has to be given for auction sale to take place. The borrower has the right to make payment of the outstanding dues and to redeem the schedule property till auction takes place. In this connection 1 2018 (4) ALD 322 (DB) 13 she has also referred to the sale notice dated 07.10.2019 to show therefrom that 30 days clear notice was provided. Regarding the judgment of this Court in Venshiv Pharma Chemicals Limited case (supra), she submits that Supreme Court had issued notice on 24.8.2019 and stayed operation of the said judgment. Therefore, no reliance can be placed by the petitioner on the decision of this Court in the above case. Insofar claim of the petitioner to the benefit of the Circular dated 01.01.2019 of the Reserve Bank of India, learned counsel for the respondent has referred to the averments made in the counter affidavit as well as to the minutes of the meeting held on 22.8.2019, whereafter the Frame Work Committee in its meeting held on 22.8.2019 opined that the relaxation terms applicable to the MSME units for restructuring of loan / financial assistance would not be applicable to the petitioner. She further submits that petitioner has got the said sale notice challenged through some other persons projecting them as tenants of the schedule property in W.P.Nos.100 and 390 of 2020. She, therefore, submits that the present writ petition is not only misconceived but is an abuse of the process of the Court and therefore should be dismissed with exemplary costs. 29 Submissions made by learned counsel for the parties have received the due consideration of the Court. 14 30 At the outset, we may deal with the objection raised by the respondent regarding non-availing of the alternative remedy by the petitioner. Section 17 of the SARFAESI Act provides for filing of application against measures to recover secured debts. For easy reference Section 17 is extracted hereunder.
17. Application against measures to recover secured debts:- (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:--
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower. Explanation.-- For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section. (1-A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction-
(a) the cause of action, wholly or in part, arises;
(b) where the secured asset is located; or
(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed for the time being.
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,-
(a) declare the recourse to any one or more measures referred to in-sub-section (4) of section 13 taken by the secured assets as invalid; and
(b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1), as the case may be; and 15
(c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section l3 to recover his secured debt. (4-A) Where-
(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,-
(a) has expired or stood determined; or
(b) is contrary to Section 65-A of the Transfer of Property Act, 1882 (4 of 1882); or
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of Section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.
(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.
31 From the above, we find that as per sub-section (1) of Section 17, any person including a borrower, who is aggrieved by any of the measures referred to in sub-section (4) of 16 Section 13 taken by the secured creditor or by his authorized officer, may make an application in the prescribed manner to the jurisdictional Debts Recovery Tribunal. Limitation for filing such application is 45 days from the date on which such measure had been taken. Sub-Section (2) stipulates that the Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of the SARFAESI Act and the Rules made thereunder. Sub-Section (3) says that after examining the facts and circumstances of the case as well as the evidence produced by the parties if the Debts Recovery Tribunal comes to the conclusion that any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor are not in accordance with the SARFAESI Act and the SARFAESI Rules and require restoration of possession amongst others of the secured asset to the borrower or other aggrieved person, it may declare such action as invalid and restore the possession of the secured asset to the borrower or to such other aggrieved person who has made the application under sub-section (1). The Debts Recovery Tribunal can also pass such direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of Section 13.
1732 Thus, from the above, it is evident that the jurisdictional Debts Recovery Tribunal has got ample power to redress the grievance of the aggrieved person who has filed an application under sub-section (1) of Section 17. The remedy of Section 17 is an adequate, effective and efficacious remedy. It is settled legal position that when there is a statutory remedy available to a person aggrieved, the High Court would not ordinarily entertain a writ petition under Article 226 of the Constitution of India. Of course, it is equally well settled that availability of alternative remedy is not an absolute bar to invocation of jurisdiction under Article 226 of the Constitution of India. In a catena of decisions, Supreme Court has held and clarified that the self imposed limitation of declining to invoke jurisdiction under Article 226 of the Constitution of India in the face of availability of alternative remedy can be relaxed when there is a complaint of violation of the principles of natural justice or when there is infraction of fundamental rights or that the authority had acted in excess of jurisdiction or when vires of a legislation is challenged. In the instant case all that the petitioner alleges is violation of the procedure prescribed. In such circumstances we are of the view that when the petitioner has adequate and efficacious alternative remedy under Section 17 of the SARFAESI Act we should not invoke our extra-ordinary jurisdiction under Article 226 of the Constitution of India.
1833 Though ordinarily in such circumstances we would have relegated the party to the forum of alternative remedy, but having regard to the fact that the writ petition is pending since the year 2019 and elaborate submissions have been made by learned counsel for the parties on merit, we would, therefore, also examine the impugned challenge on merit as well.
34 As we have seen, Section 13 of the SARFAESI Act deals with enforcement of security interest. As per sub-section (1), notwithstanding anything contained in Sections 69 or 69(A) of the Transfer of Property Act, 1882, any security interest created in favour of any secured creditor may be enforced without the intervention of the Court or Tribunal by such creditor in accordance with the provisions of the SARFAESI Act.
35 After following the procedure laid down in sub-section (2) to Section (3A) of Section 13, in case the borrower fails to discharge his liability in full, then sub-section (4) comes into play. Under sub-section (4), the secured creditor may take recourse to one or more of the measures mentioned therein to recover his secured debt including to take over possession of the secured asset by way of lease, assignment or sale for realising the secured asset etc. 19 36 In terms of sub-section (8) of Section 13, where the amount of dues of the secured creditor together with all costs, charges and expenses incurred is tendered to the secured creditor at any time before the date of publication of notice for public auction, the secured asset shall not be transferred by way of lease, assignment or sale by the secured creditor. 37 Rule 4 of the SARFAESI Rules lays down the procedure after issue of notice under section 13(2) i.e. when the amount mentioned in the demand notice is not paid within the time specified. It says that in such situation the authorized officer shall proceed to realize the amount by adopting any one or more of the measures specified in sub-section (4) of Section 13 of the SARFAESI Act.
38 The procedure for sale of immovable secured asset is laid down in Rule 8 of the SARFAESI Rules. What is relevant is sub-rule (6) of Rule 8 which says that the authorized officer shall serve upon the borrower a notice of 30 days for sale of the immovable secured asset. As per the proviso, if the sale is being effected by public auction, then the secured creditor shall cause a public notice in the prescribed form to be published in two leading newspapers including one in vernacular language having wide circulation in the locality. Such notice is also required to be affixed at a conspicuous part of the immovable property as per sub-rule (7). 20 39 As per sub-rule (5), before effecting sale of the immovable property, the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor fix the reserve price of the property for the public auction etc. 40 Sub-rule (1) of Rule 9 stipulates that no sale of immovable property under the SARFAESI Rules in the first instance shall take place before expiry of 30 days from the date on which the public notice of sale is published in the newspapers as referred to in the proviso to sub-rule (6) of Rule 8 or a notice of sale has been served on the borrower. As per the proviso, if sale of the immovable property under Rule 8 (5) fails and the sale is required to be conducted again, then the authorized officer shall serve, affix and publish notice of sale of not less than 15 days to the borrower for any subsequent sale.
41 From a conjoint reading of Rule 8 (6) and Rule 9 (1) of the SARFAESI Rules what is discernible is that a 30 days' notice of sale is required to be given by the authorized officer and no sale of immovable property under the SARFAESI Rules shall take place before the expiry of 30 days in the first instance. Of course, if such sale fails in the first instance, for subsequent sale the notice period should not be less than 15 days.
2142 Supreme Court in Mathew Varghese Vs. M. Amritha Kumar2 examined at length the provisions of the SARFAESI Act as well as the SARFAESI Rules, more particularly, interpretation of Section 13 (8) of the SARFAESI Act read with Rules 8 and 9 of the SARFAESI Rules. After a careful analysis of the aforesaid provisions, it was held as follows:
30. Therefore, by virtue of the stipulations contained under the provisions of the SARFAESI Act, in particular, Section 13(8), any sale or transfer of a secured asset, cannot take place without duly informing the borrower of the time and date of such sale or transfer in order to enable the borrower to tender the dues of the secured creditor with all costs, charges and expenses and any such sale or transfer effected without complying with the said statutory requirement would be a constitutional violation and nullify the ultimate sale.
31. Once the said legal position is ascertained, the statutory prescription contained in Rules 8 and 9 have also got to be examined as the said Rules prescribe as to the procedure to be followed by a secured creditor while resorting to a sale after the issuance of the proceedings under Sections 13(1) to (4) of the SARFAESI Act. Under Rule 9(1), it is prescribed that no sale of an immovable property under the Rules should take place before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers as referred to in the proviso to sub-rule (6) of Rule 8 or notice of sale has been served to the borrower. 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 affected 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' 2 (2014) 5 SCC 610 22 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.
43 Dilating further, Supreme Court observed that Rules 8 and 9 of the SARFAESI Rules have got a twin objective to be achieved, whereafter it was held as follows:
33.1. In the first place, as already stated by us, by virtue of the stipulation contained in Section 13(8) read along with Rules 8(6) and 9(1), the owner/borrower should have clear notice of 30 days before the date and time when the sale or transfer of the secured asset would be made, as that alone would enable the owner/borrower to take all efforts to retain his or her ownership by tendering the dues of the secured creditor before that date and time.
33.2. Secondly, when such a secured asset of an immovable property is brought for sale, the intending purchasers should know the nature of the property, the extent of liability pertaining to the said property, any other encumbrances pertaining to the said property, the minimum price below which one cannot make a bid and the total liability of the borrower to the secured creditor. Since, the proviso to sub-rule (6) also mentions that any other material aspect should also be made known when effecting the publication, it would only mean that the intending purchaser should have entire details about the property brought for sale in order to rule out any possibility of the bidders later on to express ignorance about the factors connected with the asset in question.
44 Thus Supreme Court explained that the paramount objective is to provide sufficient time and opportunity to the borrower to make all efforts to safeguard his right of 23 ownership either by tendering the dues to the creditor before the date and time of the sale or ensure that the secured asset derives the maximum price. No one should be allowed to exploit the vulnerable situation in which the borrower is placed.
45 From the above, what is evident is that a clear 30 days time gap is to be provided for effecting any sale of immovable secured asset and the right of redemption remains available to the borrower till the date and time of auction sale. 46 A Division Bench of this Court in Venshiv Pharma Chem (P) Ltd case (supra), however, construed the provisions of Rule 8 (6) and Rule 9 (1) of the SARFAESI Rules in a manner that under both the provisions separate 30 days time limit is to be provided.
47 The aforesaid decision of this Court in Venshiv Pharma Chem (P) Ltd (supra) has been stayed by the Supreme Court vide order dated 24.8.2018 in SLP No.18906 of 2018. 48 Reverting back to the facts of the present case, we find that as per the sale notice dated 07.10.2019, the date of auction was fixed on 15.11.2019. Thus clear 30 days time was provided. That being the position, the contention advanced on behalf of the petitioner that there was violation of the procedure laid down in Rule 8 (6) and Rule 9 (1) of SARFAESI Rules, cannot be sustained.
2449 That brings us to the contention of the petitioner that respondent had failed to consider the Circular of the Reserve Bank of India dated 01.01.2019 regarding restructuring of financial assistance advanced to MSME sector. In this connection we may mention that respondent had considered the above claim of the petitioner in its meeting held on 22.8.2019. After threadbare discussion the Frame Work Committee opined that petitioner was mainly doing gold business and the purpose for which the open cash credit limit was sanctioned to the petitioner i.e. processing of cotton which is MSME activity was not being carried out by the petitioner. Also petitioner had taken on lease M/s. Siddardha Cotton Ginning and Pressing Industry account which was a NPA with the Andhra Pradesh State Financial Corporation. Therefore, the Welfare Committee resolved that the relaxation terms applicable to MSME units for restructuring would not be available to the petitioner. In view of the above, the aforesaid contention of the petitioner also fails. 50 Therefore, on a totality of the facts and circumstances of the case we are of the considered opinion that the writ petition has to fail both on the point of alternative remedy as well as on merit.
51 Accordingly, the writ petition is dismissed. However, there shall be no order as to costs.
2552 Miscellaneous petitions, if any, pending in this writ petition shall also stand dismissed.
____________________ UJJAL BHUYAN, J _________________________________ Dr.CHILLAKUR SUMALATHA, J Date: 24.11.2021.
L.R. copy be marked B/o Kvsn