The court affirmed the validity of auction proceedings under the SARFAESI Act, emphasizing compliance with mandatory notice provisions is essential, and that prior acknowledgment of debts restricts objections to auction processes.

JUDGMENT

[VIA VIDEO CONFERENCING]

Amit Bansal, J. (Oral)

1. The present petition under Article 227 of the Constitution of India impugns the auction notice dated 1st September, 2021 and consequential proceedings emanating therefrom under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

2. Brief facts leading up to the filing of the present petition are that the petitioner no.1 (petitioner company), of which petitioners no. 2 to 4 are directors, availed various credit facilities from the respondent bank. To avail such credit facilities, the petitioner company had mortgaged 12 properties with the respondent bank. On 31st March, 2018, the account of the petitioner company was declared to be Non Performing Asset (NPA) and a demand notice dated 5th May, 2018 was issued to the petitioners by the respondent bank under Section 13 (2) of the SARFAESI Act, calling upon the petitioners to make payment of Rs.46,13,45,410.39/-. The petitioners, from 26th October, 2018 to 31st February, 2020, sought permission of the respondent bank to sell a few of the properties to repay their dues. Finally, on 24th February, 2021, the petitioners proposed a One Time Settlement (OTS) payment of Rs.30,00,00,000/-in respect of their dues. In the meanwhile, consequent to the respondent bank taking steps under Section 13 (4) of the SARFAESI Act to take possession of the mortgaged properties, the petitioners, vide letter dated 29th November, 2018, handed over possession of property bearing no. 11786/6, Ground Floor, Sat Nagar, Karol Bagh, New Delhi-110005. Vide letter dated 23rd August, 2021, the respondent bank requested the petitioners to improve their OTS proposal to match it with the Recovery Management Policy of the bank. In response to the letter by the respondent bank, the petitioners requested a copy of the bank policy to improve their offer, however, the respondent bank issued the impugned auction notice dated 1st September, 2021 to sell 8 out of the 12 mortgaged properties of the petitioners.

3. The present auction notice was challenged by the petitioner by way of filing a Securitization Application, being SA No.119/2021 before the Debts Recovery Tribunal-II (DRT) on 24th September, 2021. Notice on the said application was issued to the bank, returnable for 27th September, 2021. On 27th September, 2021, the Presiding Officer was on leave and the matter was adjourned to 1st October, 2021. The term of the Presiding Officer ended on 30th September, 2021.

4. Since there was no Presiding Officer available on 1st October, 2021, the petitioner filed the present petition. The petition was listed before this Court on 5th October, 2021, when it was adjourned for 6th October, 2021, for parties to verify whether or not the DRT has a Presiding Officer to hear the aforesaid SA, when both the parties confirmed that currently there is no Presiding Officer at any of the Debt Recovery Tribunals in Delhi.

5. Notice was issued in the present petition on 06th October, 2021 and it was directed that the respondent bank could auction the two properties that are subject matter of the present petition, however, the sale conformation was not to be carried till the next date of hearing. Reply and rejoinder have been filed and both counsels for parties were heard on 28th October, 2021 and 29th October, 2021.

6. It is contended by the learned senior counsel appearing on behalf of the petitioner that Rule 8(6) and Rule 8(7) of the Security Interest (Enforcement) Rules, 2002, which are mandatory in nature, have not been complied with. Reference in this regard has been made to the judgment of the Supreme Court