Telangana High Court
Manipal Housing Finance ... vs Y. Kiran Kumar, on 18 January, 2022
Bench: Ujjal Bhuyan, Chillakur Sumalatha
THE HON'BLE SRI JUSTICE UJJAL BHUYAN
AND
THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA
W.P.Nos.23804, 23805 & 25432 OF 2018
COMMON JUDGMENT AND ORDER:
(Per Hon'ble Sri Justice Ujjal Bhuyan)
All the above three writ petitions were heard together and
are being disposed of by this common judgment and order.
2 We have heard Sri R.Sushanth Reddy, learned counsel and
Sri Vivek Jain, learned counsel for the petitioners in
W.P.No.23804 of 2018 and W.P.No.23805 of 2018; Sri Ashwin
Kumar Jaiswal, learned counsel for the petitioners in
W.P.No.25432 of 2018; and Sri Sharad Sanghi, learned counsel
for the respondents in all the writ petitions.
W.P.No.23804 of 2018:
3 This writ petition has been filed by G.Anil Chand and
G.Ramesh Kumar assailing the legality and validity of the order
dated 02.05.2018 passed by the Debts Recovery Appellate
Tribunal, Kolkata, in Appeal No.207/2017/532-534, confirming
the order dated 23.05.2017 passed by the Debts Recovery
Tribunal-II at Hyderabad (Tribunal) in S.A.No.651 of 2017.
4 Petitioners are the auction purchasers who had purchased
the schedule property through auction sale. They are aggrieved
by the order of the Tribunal setting aside the auction sale which
order has been affirmed by the Debts Recovery Appellate
Tribunal, Kolkata (Appellate Tribunal) in appeal filed by the
petitioners.
2
5 Facts
leading to filing of the present writ petition are,
briefly, narrated hereunder.
6 Petitioners had purchased the schedule property bearing
open plot No.66 in Sy.Nos.56, 63, 64 and 66, admeasuring 240
Sq.Yards situated at Ward No.4, Miyapur village, Boduppal
Gram Panchayat under Ghatkesar Mandal in auction
proceedings dated 13.11.2014. The auction proceedings were
conducted to realize the loan amounts in respect of the loan
account of respondent Nos.2 and 3 i.e. Y.Kiran Kumar and Smt.
Aarthi Devi Mukhya, who had defaulted in repayment of the loan
availed of from respondent No.4 - Manipal Housing Finance
Syndicate Limited for which the loan account was classified as
Non-Performing Asset (NPA) by respondent No.4. In the auction
which was held on 13.11.2014 petitioners were the successful
bidders. They had earlier paid an amount of Rs.2,16,000-00
equivalent to 10% of the reserve price on 24.09.2014 to
respondent No.4 and paid a further amount of Rs.3,25,000-00
on 13.11.2014; thus paying an amount equivalent to 25% of the
auction sale amount as on the date of the auction.
7 By letter dated 25.11.2014 petitioners sought additional
time from respondent No.4 for payment of the balance sale
consideration on the ground that they were processing a
housing loan from Canara Bank. This was accepted by
respondent No.4, whereafter authorized officer of respondent
No.4 i.e. respondent No.1 informed the petitioners vide letter
dated 26.11.2014 that additional time was granted for availing
loan from Canara Bank to pay the balance 75%.
8 On 10.12.2014 petitioners paid the balance 75% of the
sale consideration to respondent No.4 by way of a cheque which
was directly issued by Canara Bank in favour of respondent
No.4. On such payment, a sale certificate was issued by
respondent No.4 in favour of the petitioners on the same day i.e.
on 10.12.2014.
9 Petitioners have stated that after purchasing the aforesaid
property which was an empty land, they had obtained building
permission from the competent authority and constructed a
house thereon. The construction was completed in the year
2015.
10 Respondent Nos.2 and 3 i.e. the borrowers challenged the
auction proceedings before the Tribunal belatedly contending
that the auction proceedings came to their knowledge only on
05.01.2015 whey they found some unknown persons on the
schedule property. On various grounds, the auction sale was
challenged by respondent Nos.2 and 3 before the Tribunal by
filing securitization application under Section 17 of the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (briefly, 'the
SARFAESI Act' hereinafter). The same was registered as
S.A.No.485 of 2015 before the Debts Recovery Tribunal-I,
Hyderabad which was subsequently renumbered before the
Tribunal as S.A.No.651 of 2017. Respondent No.4 contested the
said securitization application by filing reply statement.
Likewise, petitioners who were arrayed as respondent Nos.2 and
3 before the Tribunal also filed reply statement opposing the
securitization application. After hearing the parties and on due
consideration, Tribunal held that respondent No.4 had violated
Rule 8 (1) of the Security Interest (Enforcement) Rules, 2002
(referred to hereinafter as 'the SARFAESI Rules'). Tribunal
further held that there was violation of Rule 9 (4) of the
SARFAESI Rules in carrying out the auction sale. Resultantly,
the securitization application was allowed by quashing the
possession notice, auction sale held on 13.11.2014 and the
consequential sale certificate. Respondent No.4 was directed to
restore possession of respondent Nos.2 and 3 over the schedule
property as well as to refund the amount deposited by the
petitioners with simple interest at the rate of 6% p.a. from the
date of deposit till the date of payment.
11 Petitioners challenged the aforesaid order of the Tribunal
dated 23.05.2017 before the Appellate Tribunal by filing appeal
under Section 18 of the SARFAESI Rules, which was registered
as Appeal No.208/2017/532-534. Respondent No.4 also
preferred appeal before the Appellate Tribunal against the said
order of the Tribunal which was registered as Appeal
No.207/2017/532-534. By the order dated 02.05.2018,
Appellate Tribunal took the view that there was no error in the
impugned order of the Tribunal. Therefore, the appeal preferred
by the petitioners was dismissed. By separate order passed on
the same day, Appellate Tribunal also dismissed the appeal of
respondent No.4. Aggrieved, the present writ petition has
been filed.
12 Respondent Nos.2 and 3 (borrowers) have filed counter
affidavit. It is submitted that writ petition is not maintainable
as the order dated 02.05.2018 is a consent order. Respondents
Nos.2 and 3 have denied the submissions made by the
petitioners. Therefore, they seek dismissal of the writ petition.
W.P.No.23805 of 2018:
13 Petitioners of W.P.No.23804 of 2018 have filed the present
writ petition seeking the same reliefs as in W.P.No.23804 of
2018. It is not understood as to why the petitioners have filed
the present (second) writ petition seeking the same reliefs as in
W.P.No.23804 of 2018 when the said writ petition was pending.
In fact, there is no mention about why filing of the second writ
petition was necessitated. It may, therefore, be not necessary
for us to refer to the pleadings in W.P.No.23805 of 2018. Be it
stated that respondent No.2 i.e. Y.Kiran Kumar has filed counter
affidavit, which is identical to the one filed in W.P.No.23804 of
2018.
W.P.No.25432 of 2018:
14 This writ petition has been filed by Manipal Housing
Finance Syndicate Limited as the petitioner challenging the
appellate order dated 02.05.2018 dismissing its appeal. In this
writ petition the borrowers i.e. Y. Kiran Kumar and Smt. Aarthi
Devi Mukhya have been arrayed as respondent Nos.1 and 2,
whereas the auction purchasers who are the petitioners in
W.P.No.23804 of 2018 and W.P.No.23805 of 2018 have been
arrayed as respondent Nos.3 and 4.
15 Facts narrated by the petitioner Manipal Housing Finance
Syndicate Limited (for short, 'Manipal Housing' hereinafter) may
be briefly adverted to.
16 It is stated that Manipal Housing is a financial institution
within the meaning of Section 2 (zb) of the SARFAESI Act.
Ministry of Finance, Government of India, vide notification dated
10.11.2003 has recognized the petitioner Manipal Housing as a
financial institution authorized to take action under the
SARFAESI Act.
17 Respondent Nos.1 and 2 (borrowers) had applied for
housing loan form Manipal Housing which was sanctioned on
31.05.2010 for an amount of Rs.18.00 lakhs. For the purpose of
the housing loan, respondent Nos.1 and 2 deposited the original
title deeds of the schedule property in favour of Manipal Housing
on 03.06.2010 as primary security for the housing loan
sanctioned to them.
18 Respondents Nos.1 and 2 defaulted in repayment of the
loan. Consequently their loan account became irregular from
30.11.2011. Following the laid down norms, the loan account of
respondent Nos.1 and 2 was declared as Non Performing Asset
(NPA) on 30.07.2012.
19 Notice under Section 13 (2) of the SARFAESI Act was
issued by Manipal Housing to respondent Nos.1 and 2 on their
last known address on 31.07.2012. However, the said notice was
returned unserved with the postal remark that there was no
such person. It is stated that the address of respondent Nos.1
and 2 mentioned in the Section 13 (2) notice is the same as the
one furnished by the said respondents themselves in their
securitization application filed before the Tribunal under Section
17 of the SARFAESI Act.
20 Be that as it may, since the said notice was returned
unserved, the same was published in the newspapers -
Financial Express in English and Andhra Prabha in Telugu
language. There was no response to such notice as published in
the newspapers.
21 Manipal Housing issued further notice dated 15.03.2013
under Section 13 (4) (ia) of the SARFAESI Act to the borrowers,
which was also published in the newspapers - Financial Express
in English and Andhra Prabha in Telugu language on
20.03.2013. The said notice was affixed at the boundary wall of
the said property as well. Thus it is stated that there was full
compliance to the requirements of Rules 8 (1) and 8 (2) of the
SARFAESI Rules.
22 Thereafter, notice for sale under Rule 8 (6) of the
SARFAESI Rules was issued on 25.09.2014. The same was
dispatched to respondent Nos.1 and 2 in their last known
address by registered post with acknowledgement due, which
was the same as the address disclosed by respondent Nos.1 and
2 themselves in their securitization application. The said notice
for sale was also published in Financial Express and Andhra
Prabha on 10.12.2014 (sic, 10.10.2014), besides being affixed at
the boundary wall of the said plot of land.
23 In terms of the sale notice, auction was conducted on
13.11.2014. Following the auction, respondent Nos.3 and4
(petitioners in writ petition Nos.23804 of 2018 and 23805 of
2018) were declared as the successful bidders. 25% of the bid
amount was deposited by them in favour of Manipal Housing on
13.11.2014 itself. Auction purchasers had applied for
enhancement of credit limits from their banker i.e. Canara Bank
to finance their purchase, which was allowed. Thereafter, 75%
of the sale consideration was paid by the auction purchasers to
Manipal Housing on 10.12.2014, which was accepted beyond 15
days from the date of payment of the initial deposit. On such
payment, sale certificate was issued by Manipal Housing to the
auction purchasers on 10.12.2014.
24 On 12.01.2015 respondent Nos.1 and2 challenged the
auction sale by filing securitization application under Section 17
of the SARFAESI Act. The same was contested by Manipal
Housing as well as by the auction purchasers. However, by the
order dated 23.05.2017, the said securitization application was
allowed by the Tribunal by setting aside the auction sale dated
13.11.2014 as well as the consequential sale certificate dated
10.12.2014. Further Manipal Housing was directed to refund
the sale price to the auction purchasers with simple interest at
the rate of 6% p.a. from the date of deposit till the date of
payment besides restoring possession of the schedule property
to the borrowers i.e. respondent Nos.1 and 2.
25 Against the aforesaid order dated 23.05.2017 passed in
S.A.No.651of 2017, Manipal Housing preferred appeal before the
Appellate Tribunal which was registered as Appeal
No.207/2017. However, by the order dated 02.05.2018, the
appeal was dismissed.
26 Aggrieved, the present writ petition has been filed.
27 This Court by order dated 01.08.2018 had issued notice
before admission and directed maintenance of status-quo in all
respects relating to the property which was the subject matter of
S.A.No.651 of 2017 before the Tribunal.
28 Both learned counsel for the petitioners have assailed the
order of the Tribunal dated 23.05.2017 as unsustainable in law
as well as on facts. It is submitted that possession notice was
issued by Manipal Housing under Section 13 (4) of the
SARFAESI Act on 15.03.2013. This was followed by notice for
sale issued on 25.09.2014 whereafter the auction was
conducted on 13.11.2014. However, the borrowers had filed
securitization application under Section 17 of the SARFAESI Act
only on 12.01.2015, which was much beyond the limitation
period of 45 days from the date of issuance of possession notice.
This fact was overlooked by the Tribunal as well as by the
Appellate Tribunal.
29 Tribunal had held that possession notice was not affixed at
a conspicuous place of the secured asset; no proof of affixation
was placed on record. Thus it was held that the secured
creditor had violated Rule 8(1) of the SARFAESI Rules.
Submission is that possession notice was affixed at the
boundary pillar of the secured asset. However, the photographs
to this effect were misplaced. Tribunal did not provide any
opportunity to the secured creditor to produce proof of affixation
of the possession notice on the secured asset. Photographs were
placed before the Appellate Tribunal which unfairly declined to
consider the same. Therefore, it is asserted that there was full
compliance to the requirements of Rules 8 (1) and 8 (2) of the
SARFAESI Rules.
30 On the finding of the Tribunal that Rule 9 (4) of the
SARFAESI Rules was violated, it is submitted that the auction
purchasers had sought for extension of time of 15 days which
was granted so as to enable the auction purchasers to avail a
loan from the Canara bank. It is submitted that Tribunal had
failed to appreciate that Rule 9 (4) of the SARFAESI Rules was
amended in the interregnum which took effect from 04.11.2016.
As per the amendment, the words "between the parties" were
substituted by the words "between the secured creditor and the
auction purchaser". This amendment being clarificatory would
be applicable in the instant case. In any case, Rule 9 (4) comes
into play at a stage pursuant to the auction. That apart, the
said provision is for the benefit of the secured creditor and not
for the benefit of the borrower. At that stage role of the borrower
is minimal when he had already exhausted his right of
redemption. Secured creditor is free to deal with the property in
the manner in which he chooses.
31 Tribunal had also failed to take into consideration the fact
that the auction purchasers after purchase of the property had
constructed a house on the schedule property by availing loan
from Canara bank, which is being regularly repaid by the
auction purchasers.
32 In any view of the matter, the direction of the Tribunal to
handover the secured asset back to the borrowers without any
redemption is totally unjustified.
33 Appellate Tribunal completely overlooked the above
aspects, thereby leading to miscarriage of justice.
34 Learned counsel for the petitioners has placed reliance on
the following decisions:
i. Commissioner of Income Tax Vs. Gold Coin Health
Food Private Limited1;
ii. Central Bank of India Vs. C.L.Vimla2
35 On the other hand, learned counsel for the borrowers i.e.
respondent Nos.2 and 3 in W.P.No.23804 of 2018 has supported
the order of the Tribunal as affirmed by the Appellate Tribunal.
He has referred to Rules 57 and 58 of Schedule II to the Income
Tax Act, 1962 and submits that the said provisions are
mandatory. Authorised Officer had no jurisdiction to extend the
time for payment of the sale price. Further, reference has been
made to Rule 9 (4) of the SARFAESI Rules and submits that
there can be no waiver of the mandatory conditions. Failure of
the auction purchasers to pay the balance amount of 75%
within 15 days of the sale has vitiated the sale for which the
same was rightly set aside by the Tribunal and affirmed by the
Appellate Tribunal.
36 Insofar amendment to Rule 9 (4) of the SARFAESI Rules is
concerned, it is submitted that the said amendment is
prospective in nature and could not have been applied in the
present case.
1 (2008) 9 SCC 622
2 (2015) 7 SCC 337
37 Learned counsel for respondent Nos.2 and 3 has submitted
a compilation of judgments in support of his contentions and
submits that no case for interference is made out. Therefore, all
the writ petitions should be dismissed.
38 Submissions made by learned counsel for the parties have
received the due consideration of the Court.
39 As noticed above, the borrowers i.e. Y. Kiran Kumar and
his wife Smt. Aarthi Devi Mukhya, had filed the securitization
application before the Tribunal on 12.01.2015 to declare the
measures taken by Manipal Housing under Section 13 (4) of the
SARFAESI Act as illegal, arbitrary and null and void; to declare
the sale certificate dated 10.12.2014 as null and void; to deliver
vacant physical possession of the schedule property (secured
asset) to them by making demolition of the structures raised
thereon etc. In the securitization application the borrowers
admitted that they had availed a housing loan of Rs.18.00 lakhs
form Manipal Housing which was required to be repaid in 180
equated monthly installments at the rate of Rs.20,016-00 with
interest at the rate of Rs.10.25% p.a. The borrowers admitted
that they had defaulted in payment of some of the installments
towards later part of the year 2014 for various reasons. It is
stated that when they had visited the schedule property on
01.01.2015, they came to know that the schedule property was
sold by Manipal Housing whereafter sale certificate was issued.
Amongst various grounds taken in the securitization application,
the borrowers contended that Manipal Housing had not affixed
the sale notice as required under Rule 8 (1) of the SARFAESI
Rules on any conspicuous place of the schedule property.
Further ground taken was that the balance 75% of the sale price
was not paid by the auction purchasers within 15 days from the
date of sale. It was stated that as per the sale certificate the
details of payment were as under:-
24.09.2014 Earnest money of Rs.2,16,000-00 paid
13.11.2014 Rs.3,25,000-00 paid
10.12.2014 Rs.16,24,000-00 paid
40 Thus it was contended that there was violation of Rules 57
and 58 of the Income Tax Rules, 1962.
41 Be it stated that in the said securitization application, the
borrowers disclosed their address as follows:-
"R/o 8-3-228/1280/450&455,
Jawahar Nagar, Yusufguda, Hyderabad."
42 That apart, the borrowers paid court fee valuing the
securitization application at Rs.22,57,911-46 which was alleged
to be the outstanding dues as on 30.11.2014.
43 Manipal Housing in the reply statement, amongst others,
stated that despite issuance of demand notice dated 31.07.2012
under Section 13 (2) of the SARFAESI Act, the borrowers failed
to repay the loan amount. Thereafter Manipal Housing took over
symbolic possession of the schedule property vide possession
notice dated 15.03.2013 issued under Section 13 (4) of the
SARFAESI Act, which was also published on 20.03.2013 in
Financial Express, a daily newspaper in English and in Andhra
Prabha, a daily newspaper in Telugu language. It was stated
that since the schedule property was an open plot, the notice
was affixed at a conspicuous place surrounded by the property.
It was further stated that the sale notice dated 25.09.2014 fixing
auction sale on 13.11.2014 was sent to the borrowers by
registered post with acknowledgement due in the last known
address of the borrowers. But it was returned unserved with the
endorsement "addressee left". The said notice was thereafter
published in the newspapers Financial Express in English and
Andhra Prabha in Telugu language. It was stated that the
notices were sent in the same address as given by the borrowers
in the securitization application. Thus, it was contended that
Manipal Housing had followed the due procedure laid down
under the SARFAESI Act and the SARFAESI Rules. Open
auction was conducted on 13.11.2014 in which the auction
purchasers became the successful bidders. Auction purchasers
had paid earnest money of Rs.2,16,000-00 earlier i.e., on
24.09.2014 to enable them to participate in the auction in terms
of the sale notice. In the auction held on 13.11.2014 they
became the successful bidders and paid Rs.3,25,000-00 on the
same date. Both the amounts together made 25% of the sale
price, whereafter Manipal Housing confirmed the sale in favour
of the auction purchasers while directing them to pay the
balance 75% of the sale consideration within 15 days. In the
meanwhile, the auction purchasers submitted a letter dated
25.11.2014 requesting some more time for payment of the
balance amount; it was mentioned that they were in the process
of availing loan from Canara bank. On due consideration,
Manipal Housing granted time to the auction purchasers for
payment of the balance sale consideration. This was
communicated by letter dated 26.11.2014. Canara bank
sanctioned the loan to the auction purchasers whereafter issued
demand draft on 10.12.2014 for the balance sale consideration
amount of Rs.16,24,000-00 directly in favour of Manipal
Housing. On receipt of such amount, Manipal Housing executed
sale certificate in respect of the schedule property in favour of
auction purchasers. It was further contended that as against
the market value of the schedule property of Rs.18,00,000-00,
secured asset was sold for an amount of Rs.21,65,000-00. That
being the position, Manipal Housing sought for dismissal of the
securitization application.
44 Auction purchasers had also filed reply statement, which
was more or less similar to the one filed by Manipal Housing.
Additionally, it was stated that after having purchased the
schedule property through auction sale by availing loan from
Canara bank they were in peaceful possession of the schedule
property.
45 Tribunal, by the order dated 23.05.2017 recorded the fact
that as on 30.11.2014 the outstanding dues of the borrowers
stood at Rs.22,57,911-46. After referring to the rival pleadings
and submissions, Tribunal framed the following issue for
consideration:-
"Whether the applicants (borrowers) had made out any valid
ground to declare the measures taken by Manipal Housing in
respect of the schedule property under Section 13 (4) of the
SARFAESI Act as illegal, arbitrary and null and void."
46 While adjudicating the said issue, Tribunal recorded the
fact that the applicants (borrowers) did not dispute availing of
loan of Rs.18.00 lakhs from Manipal Housing by mortgaging the
schedule property as security for the said loan. Tribunal further
referred to the demand notice issued under Section 13 (2) of the
SARFAESI Act on 31.07.2012 and found that the said notice was
issued to the applicants in the same address as mentioned in
the securitization application by the applicants themselves. It
was held that it was not the case of the applicants that the
demand notice was issued to wrong address. That apart, the
said demand notice was issued by way of newspaper publication
as well. Therefore, it was held that there was no flaw in the
demand notice issued under Section 13 (2) of the SARFAESI Act.
47 Regarding possession notice dated 15.03.2013 issued
under Section 13 (4) of the SARFAESI Act, Tribunal noted that
the same was published in the daily newspapers Financial
Express and Andhra Prabha on 20.03.2013. Insofar affixation of
the said notice at a conspicuous place of the secured asset was
concerned, according to the Tribunal, the applicants had taken
a specific plea that Manipal Housing had not complied with Rule
8 (1), qua, affixture of the possession notice at a conspicuous
place of the schedule property. It was mentioned that though
Manipal Housing had pleaded in the reply statement that the
possession notice was affixed at a conspicuous place of the
schedule property, no proof was placed on record. Therefore,
Tribunal took the view that Manipal Housing had violated Rule
8(1) of the SARFAESI Rules.
48 On the plea of the borrowers that auction purchasers had
not paid the balance 75% of the sale price within 15 days of
confirmation of sale for which the sale and the consequential
sale certificate were liable to be set aside, Tribunal referred to
the provisions of Rule 9 (4) of the SARFAESI Rules as it existed
on the date of auction i.e. on 13.11.2014 since the said
provision was amended with effect from 03.11.2016. As per the
unamended provision, the balance amount of purchase price
should be paid by the purchaser on or before the 15th day of
confirmation of sale of the immovable property or within such
extended period as may be agreed upon in writing between the
parties. Referring to the decision of the Supreme Court in Sri
Siddeshwara Co-operative Bank Ltd. Vs. Ikbal3 wherein it was
held that the expression "between the parties" would mean
between the secured creditor, borrower and auction purchaser,
Tribunal held that Manipal Housing had not consulted the
applicants (borrowers) while extending the time to the auction
purchasers for depositing the balance 75% of the sale price. On
3 (2013) 10 SCC 83
that basis it was held that extension of time to deposit the
balance 75% of the sale price by Manipal Housing to the auction
purchasers was not in accordance with Rule 9 (4) of the
SARFAESI Rules and, therefore, the sale was not valid.
Consequently it was held that the sale certificate issued by
Manipal Housing to the auction purchasers was liable to be set
aside.
49 In view of above, Tribunal set aside the possession notice
dated 15.03.2013 as well as the auction sale of the schedule
property conducted on 13.11.2014 and the consequential sale
notice. Further, Manipal Housing was directed to restore
possession of the schedule property to the applicants
(borrowers) after expiry of the appeal period with a further
direction to refund the amount deposited by the auction
purchasers towards sale consideration with simple interest @
6% p.a. from the date of deposit till the date of payment.
50 Against the aforesaid order of the Tribunal dated
23.05.2017, Manipal Housing filed appeal before the Appellate
Tribunal being Appeal No.207/2017. Likewise, the auction
purchasers had also filed appeal being Appeal No.208/2017.
Both the appeals were dismissed by separate orders on
02.05.2018 by the Appellate Tribunal. In the appeal filed by
Manipal Housing, it is seen that learned counsel for the
appellant Manipal Housing had submitted before the Appellate
Tribunal that insofar setting aside of the sale held on
13.11.2014 due to non-compliance of Rule 9(4) of the SARFAESI
Rules is concerned, the appellant i.e. Manipal Housing had no
case. Therefore, learned counsel representing the appellant
Manipal Housing confined her arguments to setting aside of the
possession notice for non-compliance of Rule 8 (1) of the
SARFAESI Rules. Referring to the memorandum of appeal, it
was submitted that the sale notice was affixed at the boundary
pillar of the schedule property as would appear from the
annexed photographs. However, taking the view that at a
belated stage, appellant Manipal Housing contended that the
possession notice was affixed at a conspicuous place of the
schedule property, Appellate Tribunal held that such
photograph(s) could not be looked into. Further, the Appellate
Tribunal held that there was no valid reason as to why the
photograph(s) filed before the Appellate Tribunal could not be
filed before the Tribunal. That apart, the veracity of the
photograph(s) was also doubted. Therefore, Appellate Tribunal
did not interfere with the finding recorded by the Tribunal and
consequently dismissed the appeal.
51 Insofar the appeal filed by the auction purchasers is
concerned, we find that learned counsel appearing for the
appellants (auction purchasers) submitted that in view of the
law laid down by the Supreme Court in Sri Siddeshwara Co-
operative Bank Ltd (supra), he might not be able to assail the
view taken by the Tribunal while setting aside the sale held on
13.11.2014. Therefore, following the decision rendered in the
appeal filed by Manipal Housing, Appellate Tribunal dismissed
the appeal of the auction purchasers holding that the appeal
had no substance.
52 From a reading of the two appellate orders, it is seen that
there was concession on the part of learned counsel appearing
for both the appellants as to setting aside of the sale by the
Tribunal for non-compliance of Rule 9(4) of the SARFAESI Rules
in view of the decision of the Supreme Court in Sri Siddeshwara
Co-operative Bank Ltd (supra). If that be the position, it would
not be open to the petitioners to assail the findings of the
Tribunal as affirmed by the Appellate Tribunal, vis-à-vis non-
compliance to the provisions of the Rule 9 (4) of the SARFAESI
Rules. Therefore, the only question which would arise for
consideration is the alleged non-compliance of Rule 8(1) of the
SARFAESI Rules.
53 Rule 8 of the SARFAESI Rules deals with sale of
immovable secured asset. Sub-Rule (1) says that where the
secured asset is an immovable property, the authorized officer
shall take or cause to be taken possession, by delivering a
possession notice prepared as nearly as possible in Appendix IV
to the SARFAESI Rules, to the borrower and by affixing the
possession notice on the outer door or at such conspicuous
place of the property. As per Sub-Rule (2), the possession notice
as referred to in Sub-Rule (1), shall also be published in two
leading newspapers.
54 As we have already noticed, Tribunal did not find any flaw
in the demand notice issued by Manipal Housing to the
borrowers under Section 13 (2) of the SARFAESI Act. Tribunal
further recorded that Manipal Housing had issued possession
notice under Section 13 (4) of the SARFAESI Act to the
borrowers on 15.03.2013 and also published the same in
Financial Express and Andhra Prabha daily newspapers on
20.03.2013. However, Tribunal found fault with the affixture of
possession notice under Rule 8 (1) of the SARFAESI Rules.
Tribunal noted that the applicants (borrowers) had taken a
specific plea that Manipal Housing had not complied with Rule 8
(1) insofar affixture of possession notice at a conspicuous place
of the schedule property was concerned. Tribunal further noted
that though Manipal Housing had pleaded in its reply statement
that possession notice was affixed at a conspicuous place of the
schedule property, no proof was placed on record to substantiate
such claim. Therefore, Tribunal took the view that Manipal
Housing had violated Rule 8 (1) of the SARFAESI Rules.
55 This brings us to the findings of the Appellate Tribunal on
this issue. Before the Appellate Tribunal Manipal Housing urged
a ground that possession notice was affixed at the boundary
pillar of the schedule property and in support of such ground
photograph was annexed to the memorandum of appeal.
Further, it was argued before the Appellate Tribunal that the
Tribunal at no point of time had called upon Manipal Housing to
produce proof of affixation of possession notice at a conspicuous
place on the secured asset. Learned Appellate Tribunal however
held as follows:
"In the S.A. it has been specifically averred that possession notice
has not been affixed at a conspicuous place. The said averment has
been replied in paragraph 7 (iii) of the Reply Statement wherein it is
stated that the schedule property is an open plot, the said Notice
was affixed at the conspicuous places surrounded by the property.
No evidence or photograph which has been annexed along with the
Memorandum of Appeal, has been annexed. In the reply the
borrower in paragraph 12 has categorically denied the averment
and further submitted that the appellants are put to strict proof of
the same.
Despite such averment in the reply the appellant failed to file
photographs. There appears to be no valid reason that why
photographs, which have been filed here, could not be filed before
the DRT. If it is the case of the appellant that affixation was made
at a conspicuous place burden lies upon the Financial Institution to
prove. Further it is doubtful whether the photograph is of the
relevant date, there is nothing to show that it is of relevant date.
The Tribunal recorded categorical finding that no evidence in this
regard has been filed by the appellant."
56 From a perusal of the above, we are of the view that
Appellate Tribunal ought to have given an opportunity to
Manipal Housing to prove the genuineness and veracity of the
photograph as proof of affixture of possession notice at a
conspicuous place on the secured asset. In view of the assertion
of the appellant, the said photograph certainly was a relevant
document, having relevancy to the issue in hand. If the
Appellate Tribunal felt that it was not proper at the appellate
stage to allow additional evidence, it ought to have remanded the
matter back to the Tribunal for a fresh consideration on this
aspect. After all, this photograph had a clear bearing on the
issue as to whether there was compliance to Rule 8(1) of the
SARFAESI Rules by Manipal Housing vis-à-vis affixture of notice
at a conspicuous place on the secured asset. Both the Tribunal
and Appellate Tribunal failed to appreciate that the SARFAESI
Act is primarily meant to protect the interest of the secured
creditor. Therefore, due opportunity should have been granted
to the secured creditor to prove its claim of compliance to the
procedural requirements. That being the position, we are of the
view that it would be in the interest of justice if the matter is
remanded back to the Tribunal for a fresh consideration.
57 Since we are of the view that the matter should be
remanded back to the Tribunal, we are of the further view that
all issues and contentions should be kept open for adjudication
on remand including on the point of limitation as well as the
issue relating to Rule 9(4) of the SARFAESI Rules.
58 First we take up the issue relating to Rule 9 (4) of the
SARFAESI Rules. Learned counsel for the appellants before the
Appellate Tribunal did not press this issue; rather conceded on
this issue. Therefore we have held that the said issue cannot be
agitated at the instance of the petitioners (appellants).
Nonetheless, the same having been brought to our notice, we are
constrained to make the following observations.
59 Rule 9 of SARFAESI Rules deals with time of sale, issue of
sale certificate and delivery of possession. Sub-Rule (1) says that
no sale of immovable property shall take place before the expiry
of 30 days from the date of the sale notice. As per the proviso,
in case of subsequent sale, the period of 30 days is reduced to
15 days. Sub-Rule (2) mandates that the sale shall be confirmed
in favour of the purchaser offering the highest sale price. As per
Sub-Rule (3), the purchaser shall immediately on sale pay a
deposit of 25% of the sale price, which is inclusive of the earnest
money deposited to the authorized officer conducting the sale.
This brings us to Sub-Rule (4), which is relevant. Therefore, we
shall deal with the same a little more in detail. A part of Sub-
Rule (4) was amended with effect from 04.11.2016. Prior to its
amendment, it read as follows:
"The balance amount of purchase price payable shall be paid by
the purchaser to the authorized officer on or before the fifteenth day
of confirmation of sale of the immovable property or such extended
period as may be agreed upon in writing between the parties."
60 Thus as per the unamended Sub-Rule (4), the balance
amount of 75% of the sale price should be paid by the purchaser
to the authorized officer on or before the fifteenth day of
confirmation of sale of the immovable property or such extended
period as may be agreed upon in writing between the parties.
After the amendment, Sub-Rule (4) now says that the balance
amount of purchase price shall be paid by the purchaser to the
authorized officer on or before the fifteenth day of confirmation
of sale or such extended period as may be agreed upon in writing
between the purchaser and the secured creditor, in any case not
exceeding three months. Sub-Rule (4) of Rule 9 as it stands now
is as under:
"(4) The balance amount of purchase price payable shall be paid
by the purchaser to the authorized officer on or before the
fifteenth day of confirmation of sale of the immovable property or
such extended period as may be agreed upon in writing between
the purchaser and the secured creditor, in any case not exceeding
three months."
61 The unamended provision of Sub-Rule (4) of Rule 9 came
up for consideration before the Supreme Court in Sri
Siddeshwara Co-operative Bank Ltd (supra). It was held as
follows:
18. A reading of sub-rule (1) of Rule 9 makes it manifest that the
provision is mandatory. The plain language of Rule 9(1) suggests this.
Similarly, Rule 9(3) which provides that the purchaser shall pay a deposit
of 25% of the amount of the sale price on the sale of immovable property
also indicates that the said provision is mandatory in nature. As regards
balance amount of purchase price, sub-rule (4) provides that the said
amount shall be paid by the purchaser on or before the fifteenth day of
confirmation of sale of immovable property or such extended period as may
be agreed upon in writing between the parties.
The period of fifteen days in Rule 9(4) is not that sacrosanct and
it is extendable if there is a written agreement between the parties for such
extension. What is the meaning of the expression "written agreement
between the parties" in Rule 9(4)? The 2002 Rules do not prescribe any
particular form for such agreement except that it must be in writing. The
use of the term "written agreement" means a mutual understanding or an
arrangement about relative rights and duties by the parties. For the
purposes of Rule 9(4), the expression "written agreement" means nothing
more than a manifestation of mutual assent in writing. The word "parties"
for the purposes of Rule 9(4) we think must mean the secured creditor,
borrower and auction-purchaser.
62 Thus, Supreme Court had held that the period of 15 days
in Rule 9 (4) is not sacrosanct. It could be extended provided
there is a written agreement between the parties. According to
the Supreme Court, the word "parties" in the context of Rule 9
(4) would mean the secured creditor, borrower and auction
purchaser. On that basis, Tribunal held that Manipal Housing
had not consulted the applicants (borrowers) in extending the
time to the auction purchasers for depositing the balance 75% of
the sale price. Therefore, it was held that extension of time
granted by Manipal Housing to the auction purchasers to
deposit balance 75% of the sale price was not in accordance with
Rule 9 (4) of the SARFAESI Rules. Prima facie, the conclusion
reached by the Tribunal does not appear to be sound. It could
not have been the intention of the Supreme Court to mandate
that before the secured creditor could grant extension of time to
the auction purchaser there should be written agreement with
the borrower as well. This is because post auction purchase the
right of the borrower is minimal and extension of time for
payment of the balance 75% amount is primarily a matter
between the secured creditor and the auction purchaser being a
post auction consideration with discretion vested on the secured
creditor. This position has been made clear by the amendment
brought to Rule 9 (4) with effect from 04.11.2016, which makes
it specifically clear that such extension of time would be
dependent upon written agreement between purchaser and the
secured creditor. But such extended period should not in any
case exceed three months.
63 Since the matter is being sent back on remand, we are,
therefore, of the view that this aspect should also be looked into
afresh by the Tribunal. There is one more reason why we have
taken such a view. The borrowers had not made any statement
either before the Tribunal or before the Appellate Tribunal or
before this Court that they are willing and ready to pay the
outstanding dues. Though they may have disputed the
quantum of the outstanding dues, they have still not stated that
whatever be the outstanding dues as per their calculation that
would be paid by them to the secured creditor. In such a
scenario, when the defaulter does not come forward to pay the
outstanding amount, it would be against all cannons of justice
and equity to direct the secured creditor to handover possession
of the secured asset to such defaulter when the auction
purchaser had paid the entire sale consideration and has made
constructions thereon. In this connection, it would be apt to
refer to the decision of the Supreme Court in Central Bank of
India Vs. C.L.Vimla (supra), relevant portion of which is
extracted hereunder:
21. It appears to us that the High Court did not consider the said facts
and further it has escaped from the mind of the High Court that the
auction-purchaser has purchased the auctioned property for sale
consideration of Rs 3.27 crores and 25% of the sale consideration was duly
paid on 5-10-2006 and furthermore on 19-10-2006, the balance amount of
sale consideration was duly paid by the auction-purchaser. We have
further noted that the sale was confirmed on 15-11-2006. The sale
certificate was also issued in favour of the auction-purchaser after paying
the requisite stamp duty and registration fees which, as pointed out to us
on behalf of the auction-purchaser, is to the tune of Rs 30,73,800. It is
also not in dispute that the auction-purchaser was put in possession of
the property and is still in possession of the property since the sale
certificate was issued and registration was made in his favour. It is
submitted on behalf of the auction-purchaser that he has purchased the
property by availing private borrowing for the said property and he is
paying nearly Rs 5 lakhs per month as interest. Therefore, in our opinion,
equity and good conscience also have to play a role in the matter in
question on the given facts and after considering the conduct of the
respondents (C.L. Vimla and others) in the matter.
22. In these circumstances, we feel that it would not be proper for us
at this stage to set aside the sale, as has been done by the High Court
without taking into consideration all these facts. Further, the High Court
has failed to appreciate these facts and wrongly held that the auction-
purchaser is a party to the negligence of the Recovery Officer and,
accordingly, the sale was set aside. In our opinion, the auction-purchaser
had nothing to do in holding the auction. Rather he deposited the money
after bona fide participating in the auction and, in fact, suffered for a long
time to pay a price by participating in the auction proceedings.
23. In these circumstances, we further noticed that the principal
debtors were not prepared to pay back the amount to the Bank and did
not choose to defend themselves properly. The conduct of the principal
debtors also cannot be overlooked by us.
24. Accordingly, we set aside the order passed by the High Court and
hold that since the auction-purchaser has already paid the full amount of
sale consideration and is in possession of the property in question for more
than about 8 years, for equity and good conscience, we do not intend to
interfere with his possession and we, therefore, set aside the order passed
by the High Court, and allow these appeals.
64 Before parting with the record we may refer to Section 17
(1) of the SARFAESI Act which says that 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
the authorized officer may make an application to the
jurisdictional Debts Recovery Tribunal within 45 days from the
date on which such measure had been taken. Insofar the
securitization application of the borrowers is concerned, the
same was filed on 12.01.2015. The prayer made was to declare
the measures taken under Section 13 (4) of the SARFAESI Act as
illegal, arbitrary and null and void. The possession notice under
Section 13 (4) of the SARFAESI Act was issued by Manipal
Housing on 15.03.2013. It was sent to the same address of the
borrowers which they had furnished in their securitization
application. The said notice was also published in two
newspapers, Financial Express in English and Andhra Prabha in
Telugu on 20.03.2013. This part of the action of the secured
creditor i.e. Manipal Housing was not faulted by the Tribunal.
What was faulted was regarding affixture of the possession
notice at a conspicuous place of the schedule property as is the
requirement of Rule 8 (1) of the SARFAESI Rules. If that be the
position, prima facie, the securitization application was not filed
by the borrowers within the stipulated period of 45 days as is
required under Section 17 (1) of the SARFAESI Act.
65 From the order of the Tribunal it is not discernible as to
whether any application for condonation of delay was filed or
how the Tribunal dealt with the belated approach of the
borrowers. This is also an aspect which is required to be
examined by the Tribunal on remand.
66 Thus, on a thorough consideration of all aspects of the
matter, we are of the view that the impugned orders are required
to be set aside and the matter is required to be remanded back
to the Tribunal for a fresh decision.
67 Consequently, we set aside the order of the Tribunal dated
23.05.2017 and that of the Appellate Tribunal dated
02.05.2018. Matter is remanded back to the Tribunal for a fresh
decision in accordance with law. As we have already stated, all
contentions are kept open. It would be open to the parties to
adduce additional evidence with right of cross-examination to
the other side.
68 In the interregnum, the auction purchasers who had
purchased the schedule property shall continue to enjoy the
fruits of their purchase by maintaining their possession over the
schedule property and structures constructed thereon. However,
the same shall be subject to outcome of S.A.No.651 of 2017,
which now stands revived by virtue of the present judgment and
order.
69 Writ petitions are accordingly allowed (though there was
no necessity for filing writ petition No.23805 of 2018) in the
manner indicated above. No order as to costs.
70 Miscellaneous petitions, if any, pending in these writ
petitions, shall stand closed.
____________________
UJJAL BHUYAN, J
_________________________________
Dr. CHILLAKUR SUMALATHA, J
Date:18.01.2022.
L.R.Copy be marked
B/o Kvsn
