The court emphasized the importance of following proper procedure under SARFAESI Rules 8(5) and 8(8) for private sale, and held that the bank's failure to do so rendered the sale invalid.

1. The present writ appeal is filed against the order dated 21.02.2011 passed by a learned Single Judge in W.P. (MD) No.325 of 2007. The private respondents in the writ petition are the appellants herein.

2. The above said writ petition was filed seeking a writ of declaration that the sale certificate issued by the third respondent bank is null and void and to restore the petitioners properties to them.

3. The writ petitioners are the owners of M/s.Suruthi Fabrics and Pandias Garment Factory extending over 5.51 acres of land which have been pledged in favour of R3-bank authorities to obtain Working Capital Loan and Export Bill Discounting. The appellants herein/R1 and R2 in the writ petition are the purchasers of the mortgaged property under private treaty.

4. The admitted facts which are necessary for deciding this case are as under:

The writ petitioners mortgaged their property with the third respondent bank as security for the loan obtained by them. However, they committed default in repayment of the loan. To recover that amount, on 08.06.2005, a notice under Section 13(2) of the SARFAESI Act was issued by the third respondent bank and subsequently on 12.01.2006, possession notice under Section 13(4) of the SARFAESI Act was issued by the third respondent bank against the writ petitioners. Four writ petitions, viz., W.P. Nos.4174 of 2006, 4175 of 2006, 5027 of 2006 and 5028 of 2006 as against issuance of 13(2) notice, were also filed by the writ petitioners challenging the proceedings initiated by the third respondent bank under 13(4) of the SARFAESI Act against them. Originally, the sale was fixed on 07.07.2006. But, no sale had taken place since nobody was available to participate in the sale proceedings. At that stage and during the pendency of the writ petitions, it appears that the writ petitioners had also filed O.A. No.58 of 2006 before the Debts Recovery Tribunal, Coimbatore and on 29.06.2006, an interim order was also obtained by the writ petitioners. Subsequently, all the four writ petitions and O.A. No.58 of 2006 were withdrawn by the writ petitioners in order to make an attempt of compromise before the bank authorities. Thereafter the writ petitioners approached the bank and gave a letter dated 28.08.2006 for private negotiation by giving split-up figure for the value of the property, viz. Machineries for M/s.Suruthi Fabrics-Rs.0.40 lacs, Land and Building of M/s.Suruthi Fabrics-Rs.0.50 lacs, and Pandias Garment Factory land and building and Suruthi Fabrics 5.51 acres land-Rs.0.47 lacs. As per the letter, they have sold the machineries of Rs.42 lakhs under private negotiation and paid the said entire amount to the bank, which is also not in dispute. Thereafter, the bank authorities had sold the property under the guise of Treaty for Rs.1,23,10,000/- to the appellants herein. On 08.12.2006, an agreement was arrived at and thereafter it was sold on 15.12.2006. Thereafter, the sale certificate has also been issued. Questioning these, the debtors filed the writ petition before this Court. This Court directed the petitioners to pay the amount with 9% interest from April 2007 onwards and in turn, the respondents 2 and 3 are bound to receive the amount. The first respondent bank was also directed not to auction the property. With these observations, the writ petition was allowed.

5. The grievance of the writ petitioners is that even though they met the bank authorities on 08.12.2006, R3-bank authorities did not inform about the private sale under the "Treaty" agreement. According to the appellants, under the private negotiation, they have agreed to purchase the property on 08.12.2006 and in pursuance of the agreement, they have paid the sale amount on 15.12.2006. Thereafter, they obtained the sale certificate. Therefore, the issuance of Sale Certificate is in accordance with law.

6. The writ petitioners have sent a letter dated 11.12.2006 to the third respondent bank seeking time to make payment and the r