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2018 Supreme(Ker) 688
IN THE HIGH COURT OF KERALA AT ERNAKULAM
HRISHIKESH ROY, A.K. JAYASANKARAN NAMBIAR, JJ.
T.V. Babu - Petitioners
Versus
The Calicut Co-Operative Urban Bank & Ors. - Respondents
W.A. No.1948 of 2017
Decided On : 05-11-2018
For the Petitioners: Adv. Sri. P.B. Krishnan, Adv. Sri. P.M. Neelakandan & Adv. Sri. P.B. Subramanyan.
For the Respondents: Adv. Sri. Devaprasanth. J., Adv. Sri. A. Ranjith Narayanan.
Headnote:The Kerala Co-operative Societies Act, 1969;; The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act- Section 13;; The Security Interest (Enforcement)Rules,2002 – Rule 8 and 9 (1)
Facts of the case:
The Writ Petitioner applied for a housing loan and the loan of Rs.1,50,000/ – – The borrower defaulted in repayment of the loan and consequently the Bank initiated the proceedings under the Kerala Co-operative Societies Act, 1969 and obtained an ex-parte award from the Arbitrator – Thereafter the respondent Bank initiated proceedings under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, issued notice dated 8.1.2005 [Ext.R1(b)] followed by the possession notice in respect of the secured asset – Then the Authorised Officer of the Bank issued the sale notice on 11.6.2005 [Ext.R1(h)] under Section13of the SARFAESI Act read with Rule 8 of the Security Interest (Enforcement)Rules,2002 fixing the reserve price for the secured asset at Rs.7,50,000/- (Rupees Seven Lakhs and Fifty Thousand) and notifying that the said property will be sold on any date after expiry of 30 days' of the notice – A single quotation for Rs.7,50,100 was offered by the Thayyil Rema Chandrasekharan (respondent No.2) and accepting the same the sale was confirmed in his favour by issuing the sale certificate, as per the procedure under the SARFAESI Act – Aggrieved by the sale of the secured asset, the borrower filed the W.P.(C) No.11715 of 2007 dismissed the matter on 27.5.2016 by declaring that the case stands answered against the Writ Petitioner – The borrower then filed W.A.No.1948 of 2017 to challenge the dismissal of the Writ Petition but under the judgment dated 21.12.2017 the Writ Appeal was dismissed – The borrower then filed SLP No.6053 of 2018 to challenge the High Court's judgment which was disposed of by the Supreme Court on 16.3.2018 granting liberty to the borrower to move the High Court, to consider the Writ Appeal on merit.
Reasons for the decision:
It is not the case of secured creditor that due notice was served on the borrower, as is mandated by Rule8(6)of the 2002 Rules leading to the sale effected on 28.9.2006 – Sale without complying the requirement of 30 days' notice to the borrower is, null and void – If the sale itself is a nullity, neither the purchaser nor the secured creditor can legitimately contend that sale should be left undisturbed by the Court – If a notice would have been issued to the borrower he could have liquidated his dues to the Bank but such an option was not made available before the sale was effected – The consideration (Rs.7,50,000/-) offered by the purchaser was just Rs.100/ – above the reserve price whereas the secured land with the house, would certainly be worth much more.
Finding of the Court:
Since the borrower was not given the required notice, interference with the legally invalid sale is found to be justified and accordingly the Writ Appeal has to be allowed by setting aside the sale with consequential relief to the appellant – Another opportunity would become available to the borrower, to redeem the mortgage and accordingly, he may avail the same within a reasonable time, say 8 weeks from today – – But, if they do not discharge their loan obligation in the next 8 weeks, the Bank is at liberty to sell the secured assets, through due process.
Result: The impugned judgment dated 27.5.2016, is quashed. The W.P.(C) No.11715 of 2007 stands allowed
HRISHIKESH ROY, J.
1. Heard Sri. P.B. Krishnan the learned counsel appearing for the appellant/writ petitioner. Also heard Sri. Devaprasanth, the learned counsel appearing for the Calicut Co-operative Bank (Respondent No.1). Sri. Ranjith Narayanan appears for Thayyil Rema Chandrasekhan and Beena Premnath (Respondent Nos.2 and 3), who are the auction purchasers, of the secured asset.
2. The Writ Petitioner, (hereinafter referred to as “borrower”), applied for a housing loan and the loan of Rs.1,50,000/- (Rupees One Lakh and Fifty Thousand) was granted to him by the respondent Bank. The borrower defaulted in repayment of the loan and consequently the Bank initiated the proceedings under the Kerala Co-operative Societies Act, 1969 and obtained an ex-parte award [Ext. R1(a)] from the Arbitrator. Thereafter the respondent Bank initiated proceedings under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, (hereinafter referred to as “SARFAESI Act”), issued notice dated 8.1.2005 [Ext.R1(b)] followed by the possession notice in respect of the secured asset. Then the Authorised Officer of the Bank issued the sale notice on 11.6.2005 [Ext.R1(h)] under Section13of the SARFAESI Act read with Rule 8 of the Security Interest (Enforcement)Rules,2002 (hereinafter referred to as “the 2002 Rules”) fixing the reserve price for the secured asset at Rs.7,50,000/- (Rupees Seven Lakhs and Fifty Thousand) and notifying that the said property will be sold on any date after expiry of 30 days' of the notice.
3. The case papers indicates that the secured asset was put up for sale on 28.9.2006 and invitation was published on 14.9.2006 in the Mathrubhumi News Daily [Ext.R1(r)] and in the Deshabhimani News Daily [Ext.R1(s)] respectively.
4. A single quotation for Rs.7,50,100/-(Rupees Seven Lakh Fifty Thousand and One Hundred) was offered by the Thayyil Rema Chandrasekharan (respondent No.2) and accepting the same the sale was confirmed in his favour by issuing the sale certificate, as per the procedure under the SARFAESI Act.
5. Aggrieved by the sale of the secured asset, the borrower filed the W.P.(C) No.11715 of 2007 challenging the proceedings initiated by the Bank under the SARFAESI Act. The Writ Petition which remained pending for nearly 9 years, was taken up for hearing in May 2016 but the learned Single Judge without going into the merits of the contentions, dismissed the matter on 27.5.2016 by declaring that the case stands answered against the Writ Petitioner, through the judgment dated 9.12.2015 in W.A.No.2607 of 2015 (M/s. Sundaram BNP Paribas Home Finance Ltd. v. Nisha). The learned Single Judge opined that exercise of jurisdiction under Article 226 would not be justified, to interfere with the proceedings under the SARFAESI Act.
6. The borrower then filed W.A.No.1948 of 2017 to challenge the dismissal of the Writ Petition but under the judgment dated 21.12.2017 the Writ Appeal was dismissed. The borrower then filed SLP No.6053 of 2018 to challenge the High Court's judgment which was disposed of by the Supreme Court on 16.3.2018 granting liberty to the borrower to move the High Court, to consider the Writ Appeal on merit. Accordingly, the matter is placed before us.
7. The learned counsel Sri. P.B. Krishnan for the Appellant contends that the Bank did not issue any notice to the borrower as is mandated by Rule 8 (6)of the 2002Rules. While there is a statutory compulsion on the Authorised Officer of the Bank to issue to the borrower a notice of 30 days', for the sale of secured asset, in the instant case, no such notice under sub-rule(6)of Rule8was served on the borrower before the sale was effected. The counsel for the borrower additionally argues that the sale notice (6.9.2006) advertised in the newspaper on 14.9.2006 [Exts.R1(r) and R1(s)] would not legitimize the auction sale inasmuch as the notice under Rule8(6)to the borrower is a mandatory requirement without which, the sale
