Secured creditors must adhere to proper notice and valuation requirements per the SARFAESI Act, as failure to do so invalidates asset sales.

JUDGMENT :

(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)

1. We have heard Shri R.S.Sanjanwala, learned Senior Counsel assisted by Shri Lalit Patel, learned counsel appearing for the appellant and Mr.Mahesh Bhavsar, learned counsel appearing for the respondent.

2. This intra-court appeal is directed against the judgment and order dated 03/04.08.2023 passed by the learned Single Judge allowing the writ petition in the following manner :-

“14.1. In this view of the matter, in the considered opinion of this Court, while interference of this Court is required, yet, at the same time, since the respondent – bank is also entitled to realize its dues as a secured creditor as per the provisions of the Securitisation Act, therefore, appropriate clarifications are also required to be made. Hence, the following directions are passed:-

(i) The action on the part of the respondent bank of selling the secured asset by way of sale through private treaty more particularly pursuant to the notice dated 10.06.2021 and entering into the MOU with respondent no.3 and issuing sale certificate in favour of the respondent no.3 and all consequential actions are hereby quashed and set aside.

(ii) The respondent bank is directed to refund the amount paid by the respondent no.3 along with any expenses incurred by respondent no.3 for registration etc. to the respondent no.3 with 9% interest from the date the same had been paid/deposited by the respondent no.3.

(iii) It would be open for the respondent bank to issue fresh notice for sale of the property through any of the modes as specified under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 more particularly, after issuing sale notice as per the format prescribed as per the proviso to Rule 8(6) more particularly as per Appendix IV-A as well as issuing notice in terms of Rule 8(6) read with Rule 9(1) of the above Rules as explained herein above, more particularly with regard to stating exact amount and giving adequate notice.

(iv) Upon such notice issued by the Bank in the format as observed by the Court, it would be open to the petitioners to pay the entire outstanding and whereas, in case the entire outstanding is deposited with the respondent bank within the time stipulated in the notice, then the bank shall not proceed further and will take steps in accordance with law to return the property to the petitioners.

(v) In case the petitioners are not able to deposit the amount to be recovered as specified in the notice as above within the time stipulated in the notice, then the bank shall be at liberty to take appropriate steps in accordance with law.”

3. The appellant bank, the Secured Creditor (hereinafter referred to as ‘Secured Creditor’) seeks to challenge the order passed by the learned Single Judge on the premise that the borrowers, namely respondent Nos.1 and 2 are habitual defaulters and no indulgence could have been granted to them on the reasoning given in the judgment impugned.

4. The relevant facts to decide the controversy at hands are that a notice dated 16.10.2017 under Section 13 (2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short ‘the SARFAESI Act, 2002’) was issued to the original petitioners/respondent Nos.1 and 2 herein being borrowers (hereinafter referred to as ‘the respondent or borrowers or both’) indicating the outstanding amount against them. As there was no response