M/S. Jadala Traders vs Andhra Bank
2021 Latest Caselaw 3716 Tel

     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

* 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

2018 (4) ALD 322 (DB)

(2014) 5 SCC 610

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

(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.

8 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

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.

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

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

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

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

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

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

2018 (4) ALD 322 (DB)

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.

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

(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

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.

32 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.

33 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.

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).

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.

42 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'

(2014) 5 SCC 610

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

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.

49 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.

52 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