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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
VAIBHAVI D. NANAVATI, J.
M/s. Norton Industries Through Pravinbhai M Bane – Appellant
Versus
Punjab National Bank Through Authorised Officer & Anr. – Respondent
R/Special Civil Application No. 7718 of 2024
Decided on : 20-08-2024
SARFAESI - Borrower Rights - Section 13(2), 13(4), 14, 17, 8 - The court interpreted the provisions of the SARFAESI Act, emphasizing the necessity of timely notice and the extinguishment of redemption rights post-sale, ultimately affirming the actions of the bank as lawful and valid.
Fact of the Case:
The petitioner, a borrower, defaulted on a cash credit facility leading to the classification of their account as NPA. The bank issued a demand notice under Section 13(2) of the SARFAESI Act, which the petitioner claimed was not served. The bank later took possession of the property and sold it, prompting the petitioner to challenge the actions in court.
Finding of the Court:
The court found that the demand notice was duly served and that the bank's actions were in accordance with the SARFAESI Act. The right of redemption was extinguished upon the issuance of the sale certificate, and the petitioner failed to challenge the sale in a timely manner.
Issues: Whether the demand notice under Section 13(2) was properly served and whether the petitioner retained the right to redeem the mortgaged property after the sale.
Ratio Decidendi: The court held that the right of redemption ceases once a sale certificate is issued under the SARFAESI Act, and the failure to challenge the bank's actions within the stipulated time frame results in the finality of those actions.
Result: The petition was dismissed, affirming the bank's actions as valid.
JUDGMENT :
1. Heard Mr. Dashrath Chauhan, the learned advocate appearing for the petitioner, Mr. Lalit M. Patel, the learned advocate appearing for the respondent No.1 and Mr. Vijay H. Patel, the learned advocate appearing for the respondent No.2.
2. The petitioner herein is a borrower. The respondent No.1 having sanctioned the cash credit facility to the petitioner for an amount of Rs.3,00,000/- in the year 1997. Upon execution of the security documents the respondent Bank disbursed the said credit facility. The petitioner herein made the payment regularly to the respondent Bank but after sometime due to loss in business and unavoidable circumstances the petitioner was not in position to make payment regularly to the respondent Bank. In view thereof, the respondent No.1 classified the account of the petitioner as Non Performing Assets (NPA) on 30.3.2003.
2.1 Notice under Section 13(2) of the SARFAESI Act came to be issued by the respondent No.1 to the petitioner on 20.11.2003 demanding outstanding amount of Rs.4,06,242.96.
2.2 It is the case of the petitioner that the said notice was never served to the petitioner. After a period of 07 years the respondent No.1 issued possession notice on 5.8.2010 and thereby took the symbolic possession of the property of the petitioner.
2.3 The respondent No.1 Bank published sale notice on 12.9.2011 and put the property for sale and having sold the property for an amount to the tune of Rs.26,51,000/- issued the sale certificate on 9.11.2011 in favour of the respondent No.2 herein.
2.4 The respondent Bank filed an application under Section 14 of the Act for taking physical possession of the property in question. The order came to be passed granting the said application by the learned CMM, Ahmedabad on 30.3.2013. The petitioner thereafter filed Securitization Application No.39 of 2013 before the Debt Recovery Tribunal, Ahmedabad against the respondent No.1 Bank from taking physical / actual possession of the property in question and from any action under or pursuant to the impugned sale notice dated 20.11.2023 and from taking any further steps under Section 13(4) of the Securitization Act with respect to the property in question.
2.5 Upon hearing the respective parties the Debt Recovery Tribunal, Ahmedabad, by order dated 17.9.2013 dismissed the S.A. No.39 of 2013. It was directed to refund the residual amount to the petitioner from the sale proceeds of the secured property. The said order is duly produced at Annexure-A.
2.6 Being aggrieved and dissatisfied by the order passed by the Debt Recovery Tribunal, Ahmedabad by dated 17.9.2013 in the S.A. No.39 of 2013 the petitioner preferred appeal being Appeal No.264 of 2013 before the Debt Recovery Appellate Tribunal, Mumbai which also came to be dismissed on 16.1.2024. The said order is duly produced at Annexure-B.
3. Being aggrieved and dissatisfied by the order passed by the Debt Recovery Appellate Tribunal, Mumbai in Appeal No.264 of 2013 dated 16.1.2024 dismissing the Appeal the petitioner has approached this Court seeking the following reliefs :-
(B) YOUR LORDSHIPS MAY BE PLEASED to issue writ of mandamus or any other appropriate writ, order or direction by quashing and setting aside the impugned order passed by the Hon'ble Presiding Officer, DRT-I Ahmedabad in the Securitization Application No. 39 of 2013 dated: 17/9/2013 and further be pleased to quash and set aside the order passed by the Chairman, The Debt Recovery Appellate Tribunal at Mumbai in Appeal NO. 264/2013 dated : 16/1/2024 to confirm the order passed by DRT-I, Ahmedabad order dt : 17/9/2013 at Annexure -A and Annexure -B respectively to this petition;
(C) YOUR LORDSHIPS MAY BE PLEASED to quash and set aside the notice dated 20/11/2003 under section 13(2) of the Securitization Act and declared this notice void ab initio; and to declare the subsequent all proceeding of respondent no.1 bank after notice dated 20/11/2003 un
The court established that the right of redemption under the SARFAESI Act is extinguished upon the issuance of a sale certificate, and timely challenge to bank actions is essential.
The borrower's right of redemption is extinguished upon the publication of the auction notice, allowing the auction purchaser to claim possession.
Failure to comply with the provisions of Section 13(8) of the SARFAESI Act, 2002 and the availability of an alternative remedy before the Debts Recovery Tribunal rendered the writ petition not mainta....
Court ruled that non-compliance with SARFAESI rules voided sale; observed that the rights of borrowers can be waived through their conduct and failure to assert them timely.
Point of Law - Rule 15 of Schedule II Part I of the Income Tax Act, 1961, in the first place it will have to be stated that a reading of the said Rule does not in any way conflict with either Section....
Mandatory compliance with procedural requirements under the SARFAESI Act is essential; failure to adhere prejudices borrowers' rights and invalidates auction proceedings.
The right to redeem mortgaged property under the SARFAESI Act is extinguished once the auction notice is published, indicating no entitlement to challenge the sale thereafter.
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