Non-compliance with the mandatory notice requirement under Section 13(2) of the SARFAESI Act vitiates subsequent actions under the Act.

AHSANUDDIN AMANULLAH, J.

1. Heard learned counsel for the parties.

2. The petitioner has moved the Court against the order dated 18.12.2015 passed under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the’ SARFAESI Act’) on the ground that the mandatory requirement of law for service of notice under Section 13(2) of the SARFAESI Act has not been complied with.

3. Learned counsel for the petitioner submits that the mandate conferred on the secured creditor, under the SARFAESI Act, gives it sweeping powers to achieve the purpose of recovery of its loans and the provisions are stringent in nature. It is, thus, submitted that for taking recourse under the SARFAESI Act, when the provisions are so stringent and the penal consequences very strict, the requirement of law is strict adherence to the procedure prescribed under it which has been held by the Courts also to be mandatory. Learned counsel submits that as per Section 13(2) of the SARFAESI Act, where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). Learned counsel submits that the said mandatory notice, under Section 13(2) of the Act, was required to be delivered on the borrower (petitioner), which has not been done. Learned counsel submits that the power vested under Section 13(4) of the SARFAESI Act is only subsequent to and subject to fulfillment of the requirement of Section 13(2) of the SARFAESI Act and in the present case, the same not having been done, the action impugned of the UCO Bank (hereinafter referred to as the ‘Bank’) in directly serving notice under Section 13(4) of the SARFAESI Act cannot be sustained. Learned counsel further submits that even Section 13(4) of the SARFAESI Act read with Rule 8 (1) and (5) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the ‘Rules’) stipulates that such possession notice has to be delivered to the borrower and also affixed on the outer door or at such conspicuous place of the property and further it shall also be published as soon as possible, but in any case not later than seven days from the date of taking possession in two leading newspapers and further that 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 and then may proceed to sell whole or part of immovable assets by the methods prescribed in sub-clauses (a) to (d) of Rule 8(5) of the Rules. Learned counsel submits that valuation relied upon by the respondent Bank is stale as the same is based on inspection made by the valuer on 06.01.2014 which has been brought on record by the Bank itself in its counter and further that there has been no consultation with the borrower i.e., the petitioner, before fixing the reserve price of the property prior to effecting sale. Learned counsel submits that the said requirement of law with regard to the Bank invoking the power under the SARFAESI Act have been held to be mandatory and any action contrary to the said provisions of the Act and Rules, cannot be sustained as has been laid down in the case of Mathew Verghese v. M. Amritha Kumar reported in (2014) 5 SCC 610, the relevant being at paragraph-53, where the Hon’ble Supreme Court has held that in terms of Rule 8(6) of the Rules, minimum 30 days notice for sale of the immovable sec