Court Dismisses Appeal Challenging SARFAESI Proceedings Due to Waiver of Redemption Rights - 2024-02-05

Court Dismisses Appeal Challenging SARFAESI Proceedings Due to Waiver of Redemption Rights

Background:

The appellants, a borrower and a guarantor, challenged the proceedings initiated by the respondent bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) for recovery of dues. The appellants claimed that the demand notice issued by the bank was invalid due to an incorrect date of declaration of the loan account as non-performing asset (NPA) and that the description of the property in the sale notice differed from the demand notice and possession notice.

Legal Question:

Whether the appellants' right to redeem the property was waived due to their failure to tender the dues before the auction sale was completed and the sale certificate was issued.

Arguments Presented:

• Appellants:

  • The demand notice was invalid due to an incorrect date of declaration of NPA, which vitiated the subsequent proceedings under the SARFAESI Act.
  • The description of the property in the sale notice differed from the demand notice and possession notice, rendering the proceedings illegal.
  • The appellants had deposited the entire amount due to redeem the property before the Tribunal below, and the property was sold despite a restraint order.

• Respondent Bank:

  • The date of declaration of NPA is not a mandatory requirement for a valid demand notice under the SARFAESI Act, and any incorrect date mentioned therein does not invalidate the proceedings.
  • The appellants failed to plead the issues related to the incorrect date of NPA and the description of the property boundaries before the Tribunal below or the appellate Tribunal.
  • The appellants lost their right of redemption as they failed to tender the dues before the auction sale was completed and the sale certificate was issued.

Court's Analysis and Reasoning:

• The court observed that the appellants had not pleaded the issues related to the incorrect date of NPA and the description of the property boundaries before the Tribunal below or the appellate Tribunal, and therefore, it would not be appropriate to deal with these issues.

• The court further noted that the appellants had offered to redeem the property after the auction sale was completed and the sale certificate was issued, which was beyond the time prescribed in the SARFAESI Act.

• The court held that the appellants had waived their right to redeem the property by failing to tender the dues before the auction sale was completed and the sale certificate was issued.

Decision:

The court dismissed the appeal, holding that the order impugned did not call for any interference. The court also noted that the appellants had waived their right to redeem the property by failing to tender the dues before the auction sale was completed and the sale certificate was issued.