Back
2016 Supreme(All) 4171
DEBT RECOVERY APPELLATE TRIBUNAL, ALLAHABAD
V.K. Mathur, Chairperson.
State Bank of India – Appellant
Vs.
Vimla Devi - Respondent
Appeal No. R-52 of 2015
Decided On : 22-04-2016
For the Appellant :Mr. S.K. Srivastava, Advocate
For the Respondent:Mr. Kushal Kant, Advocate, Mr. Kripa Shankar Singh
Strict compliance with the mandatory provisions of the Security Interest (Enforcement) Rules, 2002 is necessary for the validity of auction sales conducted under the SRFAESI Act.
Headnote:
SRFAESI Act - Auction Sale - Rule 8(6) and 8(7) - [Section 18 of the SRFAESI Act] - [Rule 8(6) and 8(7)] - The court discussed the non-compliance of mandatory provisions of Rules 8(6) and 8(7) of the Security Interest (Enforcement) Rules, 2002 and highlighted the individual notice requirement to the borrower and the necessity of clear 30 days' notice for the sale of immovable property. The court emphasized the importance of strict compliance with the rules and held that the auction sale conducted by the Appellant-Bank in violation of these mandatory requirements is invalid.
Fact of the Case:
The Appellant-Bank issued a demand notice under Section 13(2) of the SRFAESI Act for a sum of Rs. 4,75,671.99 with future interest. The auction sale of the property was set aside by the DRT due to non-compliance of Rules 8(6) and 8(7) of the 'Rules'.
Finding of the Court:
The court found that there was non-compliance of mandatory Rule 8(6) and 8(7) of the Security Interest (Enforcement) Rules, 2002, and the auction sale conducted by the Appellant-Bank in violation of these mandatory requirements is invalid.
Issues: The main issue was the compliance with Rules 8(6) and 8(7) of the 'Rules' in the auction sale process.
Ratio Decidendi: The court emphasized the necessity of strict compliance with the rules, particularly the individual notice requirement to the borrower and the clear 30 days' notice for the sale of immovable property.
Final Decision: The Appeal was dismissed with no order as to costs.
V.K. Mathur, Chairperson.
This Appeal has been preferred by the Appellant-Bank under Section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "The SRFAESI Act") against the order dated 8th May, 2015 passed by the learned DRT, Allahabad, wherein the Securitization Application No. 87 of 2015 filed by the Respondent Nos. 1 and 2-borrowers was allowed and the auction sale conducted by the Appellant-Bank in favour of the Respondent No. 3-auction purchaser was quashed. It was further directed that the borrowers to deposit the entire sum due along with interest and all expenses and charges within fifteen days and the Appellant-Bank was to refund the amount deposited by the Respondent No. 3-auction purchaser within fifteen days.
2. The brief facts for adjudication of the present case are that the Appellant-Bank granted certain credit facilities to the Respondent Nos. 1 and 2 and the said Respondents mortgaged their property by depositing the original title deed standing in their name. The loan account of the Respondent Nos. 1 and 2 was declared as non-performing asset by the Appellant-Bank. The Appellant-Bank issued a demand notice under Section 13(2) of the SRFAESI Act on 19th March, 2008 for a sum of Rs. 4,75,671.99 with future interest.
3. The Appellant-Bank has further stated that the notice under Section 13(4) of the SRFAESI Act was issued by the Appellant-Bank on 14th August, 2009 and the sale notice was published in two newspapers on 10th February, 2015 scheduling the auction of the property in question on 14th March, 2015. The Respondent Nos. 1 and 2 preferred the securitization application under Section 17 of the SRFAESI Act before the DRT below challenging the auction sale process which was allowed and the auction sale conducted by the Appellant-Bank was set aside vide the impugned order dated 8th May, 2015. Being aggrieved by the said impugned order, the Appellant-Bank has filed the present Appeal before this Tribunal under Section 18 of the SRFAESI Act.
4. Learned Counsel for the Appellant Bank argued that the Learned Tribunal below has erred in setting aside the auction sale of the mortgaged property of the borrowers Respondent Nos. 1 and 2 on the ground of non-compliance of Rules 8 (6) and 8(7) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'Rules'). It was contended that the Rule 8 (6) of the Rules was complied by serving the notice on the Respondent No. 1 which is sufficient notice on the borrowers-Respondent Nos. 1 and 2. The sale notice was published in two newspapers on 10th February, 2015 in furtherance of which the auction sale of the property was effected on 14th March, 2015 in favour of the Respondent No. 3. It was also submitted that the sale notice was affixed on the conspicuous part of the property in question. It was prayed that the impugned order dated 8th May, 2015 setting aside the auction sale be quashed.
5. Learned Counsel for the Respondent Nos. 1 and 2-borrowers submitted that the Learned Tribunal below has rightly set aside the auction sale of the mortgaged property in view of non-compliance of mandatory provisions of Rules 8(6) and 8(7) of the 'Rules'. It was submitted that the sale notice under Rule 8(6) was not served individually on both the borrowers and there is no evidence that the sale notice was affixed on the conspicuous part of the immovable property which clearly vitiates the auction sale.
6. The Respondent No. 3 Kripa Shankar Singh-auction purchaser has reiterated the submissions of the learned Counsel for the Appellant-Bank. It was submitted that the Respondent No. 3 is a bona fide purchaser and the impugned order be set aside.
7. Heard the learned Counsels for the parties and perused the record of the case.
8. In the present case, the Appellant-Bank issued the demand notice under Section 13(2) of the SRFAESI Act on 19th March, 2008 for a sum of Rs. 4,75,671.99 wit
