Back
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
M.S. Ramachandra Rao,Harminder Singh Madaan, JJ.
Skytone Electricals (india) Limited – Appellant
Versus
Canara Bank & Ors. – Respondents
CWP No.12301 of 2020 (O&M)
Decided On : 18-05-2022
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Non Performing Asset - Sale of Immovable Secured Assets - Violation of Rules - Extension of Time for Payment - Sale Certificate Set Aside
Fact of the Case:
The petitioner, a company incorporated under the Companies Act, 2013, challenged the sale certificate issued to respondent No.3 by the Canara Bank on the grounds of violation of rules in the sale of immovable secured assets and the impermissible extension of time for payment of the balance consideration.
Finding of the Court:
The court found that the sale certificate issued to respondent No.3 was liable to be set aside due to the violation of rules in the sale process and the impermissible extension of time for payment of the balance consideration. The court also ordered the restoration of possession of the secured assets to the Bank and the forfeiture of the initial amount deposited by respondent No.3.
Issues: The issues before the court included the permissibility of entertaining the writ petition when an alternative remedy was available, the necessity of a fresh valuation before the sale, and the permissibility of extending the time for payment of the balance consideration beyond the prescribed period.
Ratio Decidendi: The court held that the writ petition could be entertained due to the allegation of violation of provisions of the statute by the Bank. It also found that the failure to obtain a fresh valuation before the sale and the impermissible extension of time for payment of the balance consideration vitiated the sale in favor of respondent No.3.
Final Decision: The court allowed the writ petition, set aside the sale certificate issued to respondent No.3, ordered the restoration of possession of the secured assets to the Bank, and directed the forfeiture of the initial amount deposited by respondent No.3. The Bank was given liberty to conduct a fresh sale of the secured assets after obtaining a fresh valuation in strict compliance with the provisions of the Act and the Rules.
JUDGMENT
M.S. Ramachandra Rao, J. - Background facts Petitioner No.1 is a company incorporated under the Companies Act, 2013. Certain credit facilities were offered to the petitioner by the Canara Bank (respondents No.1 and 2). The loan account of the petitioner was declared as Non Performing Asset (NPA) on 30.09.2016 by the respondent-Bank, and it issued on 19.01.2017, a notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Act') claiming Rs. 26,91,23,862.81 as on 31.12.2016. Though the petitioner filed objections under Section 13(3A) of the Act on 23.03.2017 requesting the respondent-Bank for rehabilitation instead of initiating coercive action, the same was not accepted by the respondent-Bank on 07.04.2017.
2. Thereafter on 22.06.2017, the respondent-Bank issued notice under Section 13(4) of the Act taking symbolic possession of the mortgaged properties.
3. It also obtained on 25.10.2017 an order under Section 14 of the Act from the District Magistrate, Faridabad to take physical possession of the mortgaged properties.
4. Certain OTS proposals were made by the petitioner in the years 2017 and 2018 which were rejected on 05.06.2018.
5. The various sale notices A sale notice Annexure P-13 dt.26.06.2018 was issued by the respondent-Bank putting the mortgaged properties to sale for a consolidated reserve price of 27.16 Crores, but no bids were received.
6. The respondent-Bank then issued second sale notice Annexure P-14 on 06.08.2018 putting the properties to sale with the same reserve price as earlier, but again no bids were received.
7. It thereafter obtained a valuation report on 05.01.2019 with regard to immovable property, and another valuation report on 06.03.2019 with regard to movable property for fixing reserve price as per Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'the Rules').
8. It then issued a third sale notice Annexure P-16 dt.22.07.2019, and fixed the reserve price of Rs. 2804.65 Lakhs. No bids were received even for this sale which was proposed to be held on 28.08.2019.
9. Thereafter, no further valuation of the movable and immovable properties was obtained by the respondent-Bank, and it issued a fourth sale notice on 30.01.2020 (Annexure P-19) fixing the date of sale as 29.02.2020 for a reserve price of Rs. 2524 Lakhs.
10. The result of the fourth auction Respondent No.3 (Auction Purchaser) became the highest bidder in the said e-auction and deposited 10% of the bid amount on that day and on 02.03.2020, he deposited 15% more. Thereafter, respondent-Bank confirmed his bid vide Annexure R-4 dt.03.03.2020, and directed him to deposit 75% balance bid amount by 18.03.2020 i.e. within the 15 days' period prescribed in Rule 9(4) of the Rules.
11. Various extensions granted to the Respondent No.3 by the Bank for paying the bid amount a) The First extension However, this was not complied with by respondent No.3, and respondent No.3 sought for an extension of time for depositing the balance amount of 75% till 18.04.2020 vide Annexure R-7 dt.12.03.2020. Such extension was granted by the respondent-Bank to respondent No.3 till 18.04.2020 vide Annexure R-8 dt.13.03.2020.
b) The Second extension Even in this extended time, respondent No.3 could not make an deposit, and he again sought extension for the second time for three months vide Annexure R-9 dt.20.04.2020.
12. On the same day, the respondent-Bank granted the second extension to respondent No.3 till 25.05.2020 vide Annexure R-10.
c) The Third extension In spite of being granted the second extension, respondent No.3 did not make the deposit of balance 75% of the bid amount, and it again made a request on 22.05.2020 vide Annexure R-11 for extension of time for making the deposit of the balance 75% of the bid amount till 25.08.2020.
13. The respondent-Bank again agreed to the said request, and granted extension of time for the
The main legal point established in the judgment is that the sale of secured assets must comply with the rules and regulations, including obtaining a fresh valuation before the sale and adhering to t....
The auction sale of secured assets was invalid due to violations of statutory procedures, including failure to obtain separate valuations and selling below the reserve price.
The Tribunal clarified the procedural validity of auction sales under SARFAESI Act, emphasizing compliance with Rules 8 and 9 regarding notice requirements.
Mandatory compliance with Rule 9(4) requires written agreement for extending balance payment beyond 15 days in e-auctions under SARFAESI Rules.
The main legal point established in the judgment is the mandatory requirement of a 15-day notice for subsequent sales under Rule 9(1) of the SARFAESI Act and the importance of clear notice to the bor....
Secured creditors must adhere to proper notice and valuation requirements per the SARFAESI Act, as failure to do so invalidates asset sales.
The validity of the sale/e-auction notice under the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002.
Sale at reserve price under SARFAESI Rules requires borrower consent; reserve price notice discrepancies vitiate auction process.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
