DEBT RECOVERY APPELLATE TRIBUNAL, MUMBAI
Raj Mani Chauhan, Chairperson, J.
Soma Papers and Industries Ltd. —Appellant
versus
Bank of India and Ors. —Respondents
Appeal No. 79 of 2008 and M.A. Nos. 330, 802, 812 of 2008
Decided on 7.1.2014

Headnote:Securitization and Reconstruction of Financial Assets and Enforcement of security Interest Act, 2002 — Sections 13(2), 13(4) and 17(1) — Security Interest (Enforcement) Rules, 2002 — Rules 6(2) and 8(6) —Auction sale — Non-compliance of Rules 6(2) and 8(6) of the Rules — Authorized officer had sold the suit property by way of auction sale which included movable and immovable properties — Validity of — Appellant company had availed various credit facilities sanctioned by consortium of Banks — Amount of credit facilities availed by the borrower was secured by creation of joint equitable mortgage of immovable properties and joint hypothecation of movable properties by the borrowers and guarantors in favour of consortium of Banks — Borrower and guarantors committed default in repayment of installments of credit facilities availed by them — Authorized officer sold the suit property by way of public auction — In the sale notice, Authorized officer did not mention the hypothecated movable properties while he had sold both the movable and immovable suit properties — Sale of immovable property alone could have been sufficient to satisfy the claim of Banks — Presiding officer dismissed the appeal filed by appellant without appreciating the evidence available on record — Whether the impugned judgment and order passed by the presiding officer was liable to be quashed —(Yes)

       Held: From a perusal of the copy of the impugned sale notice, it appears that not description of the movable Suit property to be sold with identification marks or numbers if any, as required under Rule 6(2)(a) and no proper description of the immovable property to be sold including the details of any encumbrances are mentioned. The immovable property to be sold has not been described with the survey number and mark of demarcation with boundaries. The sale notice therefore, is not in conformity with the aforesaid rules which is invalid.

       From a perusal of the demand notice dated 21st November, 2005 issued by the Authorized Officer under Section 13(2) of the SARFAESI Act, it appear that the total outstanding dues of all the consortium Banks as indicated in the notice is Rs. 3,55,99,263.06 due as on 20th November, 2005 plus interest. Although the appellant has contended that the valuation of the Suit property as obtained by the Authorized Officer is on lower side. But it has not filed any evidence to show the higher valuation. As per the valuation report, the immovable assets have been valued as Rs. 9,11,98,000. The distress sale value is shown as Rs. 5,93,00,000. The value of the movable Suit property is shown as Rs. 1,50,78,000 while the distress sale value is shown as Rs. 1,13,09,000. The sale of the immovable Suit property alone was, therefore, sufficient to satisfy the claim of all the consortium Banks.

       In view of the aforesaid observation of the Hon’ble Court, it was fair and proper on the part of the Authorized Officer to take a decision before publication of sale notice as to whether both or one of the suit properties was required to be sold to satisfy the outstanding dues of consortium Banks. If one of the Suit property was sufficient to satisfy the dues of the consortium Banks, the Authorized Officer was not required to sell both the Suit properties. Since in its case, the valuation of the immovable suit property as reported by the valuer appears to be sufficient to satisfy the claim of the consortium Banks as indicated in the demand notice. Therefore, the Authorized Officer in all fairness was required to give an opportunity to the borrower to inform him as to whether he wants to remove the movable Suit properties lying on the immovable Suit property or the same should be also sold along with the immovable Suit property. In view of these facts the sale conducted by the Authorized Officer does not appear to be fair.

       Assuming that the appellant in the present case was well aware of the entire sale process initiated by the Authorized Officer, therefore, he was not required to be served advanced notice on30 days of the proposed sale as contemplated under the Rule 8(6) of the Rules but the sale notice as published by the Authorized Officer is not in conformity with the Rules 6(2) and 8(6) of the Rules.

       From a perusal of the impugned judgment and order passed by the leaned Presiding Officer it appears that the learned Presiding Officer had not appreciated the contentions raised by the appellant in the light of the evidence available on record. The impugned judgment and order passed by the learned Presiding Officer is, therefore, bad in the eyes of law and is liable to be quashed. The Appeal as well as the S.A. filed by the appellant deserve to be allowed. Although the appellant has not prayed for specific relief for quashing the sale but if the sale notice is held to be illegal the entire sale process including the impugned sale shall stand vitiated. (Paras 53, 54, 57, 63, 68)

       Result: Appeal Allowed.