Back
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
M.S. Ramachandra Rao, Jasjit Singh Bedi, JJ.
Vijay Madan & Ors. – Appellants
Versus
Punjab National Bank & Ors. – Respondents
CWP No. 16095 of 2018 (O&M)
Decided On : 24-05-2022
SARFAESI Act - Sale Notice - Rule 9(1) - Summary of Acts and Sections: The court discussed the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and specifically focused on Rule 9(1) which prescribes the procedure for sale of immovable property under the Act. The court highlighted the mandatory requirement of a 15-day notice for subsequent sales and emphasized the importance of clear notice to the borrower and public notice in accordance with the rules. The court referred to legal precedents and interpretations of the rules to support its decision.
Fact of the Case:
The firm availed a Cash Credit Limit from a bank, and proceedings were initiated under the SARFAESI Act for outstanding dues. The bank attempted multiple sales of the mortgaged property, but the petitioners challenged the legality of the sales due to violation of Rule 9(1) regarding the notice period for subsequent sales.
Finding of the Court:
The court found that the sale conducted by the bank was illegal and null and void as it did not comply with the mandatory 15-day notice requirement for subsequent sales under Rule 9(1) of the SARFAESI Act. The court set aside the sale certificate and directed the bank to refund the amount paid by the auction purchasers with interest. The court also granted liberty to the bank to conduct a fresh auction in accordance with the law.
Issues: The main issue was the legality of the sale conducted by the bank and the violation of Rule 9(1) of the SARFAESI Act regarding the notice period for subsequent sales.
Ratio Decidendi: The court's decision was based on the interpretation of Rule 9(1) of the SARFAESI Act, emphasizing the mandatory requirement of a 15-day notice for subsequent sales and the importance of clear notice to the borrower and public notice in accordance with the rules.
Final Decision: The Writ Petition was allowed, the order passed by the Debt Recovery Tribunal was set aside, the sale conducted by the bank was declared illegal and null and void, the sale certificate was set aside, and the bank was directed to refund the amount paid by the auction purchasers with interest. The bank was also granted liberty to conduct a fresh auction in accordance with the law.
JUDGMENT
M.S. Ramachandra Rao, J. - Background facts
2. Petitioner No.1 is one of the partners of the firm i.e. M/s S.L.N. Industries (hereinafter referred to as "Firm") and petitioners No.2 and 3 are Gurantors/Mortgagors to the loan taken by the said Firm from the Punjab National Bank (Respondents No.1 to 3).
3. The Firm had availed a Cash Credit Limit of Rs. 1 Crore from respondents No.1 to 3-Bank on 08.07.2009 on certain terms and conditions against the hypothecation of goods, which was further secured by the personal guarantee of the petitioners No.2 and 3 who also created equitable mortgage on their House No. 254, Sector 16-A, Faridabad.
4. Proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to "the Act of 2002") were initiated by the Bank against the Firm and the petitioners through a notice dt.04.01.2013 issued under Section 13(2) of the Act of 2002 demanding Rs. 1,03,19,739.73 paise outstanding as on 31.12.2012.
5. Thereafter, symbolic possession of the residential house of the petitioners No.2 and 3 was taken by the Bank on 13.03.2013.
6. The said action of the Bank was questioned by the guarantors by filing SA No.73 of 2013 before the DRT-I, Chandigarh.
7. Vide order dt.15.03.2013, the said Tribunal had directed the applicants in the said SA No.73 of 2013 to deposit Rs. 20 Lakhs with the respondent-Bank within two weeks, and directed maintenance of status quo till the next date of hearing.
8. Though the said amount was deposited, the status quo orderwas vacated on 10.08.2015. Subsequently, the Bank issued a fresh demand notice dt.14.01.2016 under Section 13(2) of the Act of 2002 demanding Rs. 80,23,173.73 ps outstanding as on 14.01.2016 vide Annexure P-4.
9. The various sale notices The respondent-Bank issued first sale notice on 06.08.2016 (Annexure P-5) proposing to sell the property for a reserve price of Rs. 1.30 Crores, but no bidder came forward for the same.
10. The Bank issued notice dt.10.07.2017 (Annexure P-8) under Section 13(4) of the Act of 2002 read with Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'the Rules').
11. It again attempted to sell the property through a second sale notice dt.10.07.2017 (Annexure P-9) for 16.08.2017, but again no bidders came forward for the same. Later, it issued a third sale notice dt.25.10.2017 proposing sale of the property on 29.11.2017 but still no bidder came forward and so the property could not be sold.
12. The District Magistrate, Faridabad passed an order on 08.03.2018 under Section 14 of the Act of 2002 vide Annexure P-11 for taking over the physical possession of the subject secured asset.
13. Lastly, the fourth sale notice dt.12.03.2018 (Annexure P-13) was issued by the Bank proposing to sell the house property of petitioner No.3 (guarantor) on 28.03.2018 in order to recover Rs. 10,82,63,404.02 paise from the firm. This notice was actually dispatched on 13.03.2018 and was delivered to the petitioners on 20.03.2018. The sale certificate dt.01.05.2018
14. On 01.05.2018, vide Annexure R-2, Sale Certificate was issued to respondents No.4 and 5 by the respondent-Bank after deposit of the balance bid amount.
Contentions of counsel for the petitioners
15. Counsel for the petitioners contended that this is in violation of proviso to Rule 9 (1) of the Rules which prescribes that for a subsequent sale, there must be not less than 15 clear days between the date of service of notice of the sale and the date of the sale.
16. In support of his submissions, he placed reliance on the decision of this Court in the case of M/s Hoshiarpur Roller Flour Mills Private Limited and Another Vs. Punjab National Bank, Circle Office, Hoshiarpur and others.
17. Counsel for the petitioners also seeks setting aside of sale certificate dt.01.05.2018 issued by the Bank to respondents No.4 and 5- Auction Purchasers.
18. The petitioners had also moved an interim application bearin
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.
It is mandatory for the Secured Creditor/Bank to effect personal service of the sale notice, apart from publication as provided under Rule 8 & 9 of the Security Interest (Enforcement) Rules, 2002.
Point of Law : Provisions of section 13(8) of Act gave power to borrower to redeem property till last minute before sale takes place.
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
