IMPORTANT POINT
Sale can be confirmed at price equal or higher than reserve price. Consent of the borrower required only if sale price is less than reserve price.

A.S. Bopanna, J.—The petitioner is before this Court assailing the sale notice dated 07.11.2016 in relation to the petition schedule property, registered on 18.11.2016 as at Annexure-A to the petition and is seeking that the same be quashed.

2. The fact that the petitioner being the owner of the petition schedule property and the other properties, had created charge on the same in favour of the respondent No.3 in view of the financial assistance secured is not in dispute. The fact that the amount was due and payable and in order to recover the same, action was initiated also cannot be in dispute. The said process of recovery was assigned by respondent No.3 to respondent No.4 in terms of the provisions contained in The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short). Respondent No.4 thereafter initiated proceedings for recovery of the amount by bringing the security interest to sale in terms of The Security Interest (Enforcement) Rules, 2002 (‘Rules 2002’ for short).

3. In the said process, respondent No.4 got issued a public auction sale notice dated 10.09.2016 where under all the properties over which charge was created was brought to sale. The petition schedule property was shown as property No.2 in the sale notice and the reserve price was fixed at Rs.5.70 crores. Through the auction conducted the property is sold under the impugned sale certificate dated 07.11.2016 for the said amount of Rs.5.70 crores which is same as the reserve price that was fixed. The petitioner who is therefore aggrieved is before this Court in this petition.

4. The contentions urged herein is two fold. Firstly it is contended that the sale is to be conducted by the authorised officer in terms of Rule 8(5) of the Rules 2002 but the sale conducted in the instant case is not by an ‘authorised officer’ and as such the sale is void. In that regard, reference is made to Rule 2(a) of the Rules 2002 to point out the definition of the term ‘authorised officer’ as contained therein. In that light, it is contended that the person who conducted the sale in the instant case is not appointed in terms of what is contained in the said provision. Secondly it is contended that the confirmation of the sale made is in violation of Rule 9(2) of Rules 2002 as the sale has been confirmed for the same price which was indicated as the reserve price but the consent of the borrower has not been obtained as required under the said provision. The said contentions are countered by the learned senior counsel for the respondents.

5. Since these are the only contentions urged in this petition with reference to the provisions in the Rules, 2002, it is appropriate to extract the relevant rules on which reliance is placed. They read as hereunder:—

“2. Definitions:—In these rules, unless the context otherwise requires,—

(a) “authorised officer” means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the [Act];

9. Time of sale, issue of sale certificate and delivery of possession, etc.:—

(1) XXXXX

(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer and shall be subject to confirmation by the secured creditor:—

Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of rule 8:

Provided further that if the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at