Point of Law :
There is nothing in the legislative scheme of Section 13(3-A) which requires the Court to consider whether or not, the word “shall” is to be treated as directory in the provision. As the section stood originally, there was no provision for the abovementioned requirement of a debtor to make a representation or raise any objection to the notice issued by the creditor under Section 13(2).

ORDER :

M.S. Ramachandra Rao, J.

The petitioner No.1 is a Company registered under the Companies Act, 1956 and deals in pharmaceuticals. The petitioner No.2 is its Managing Director.

2. The Andhra Bank (1st respondent) sanctioned working capital limits of Rs.35.00 lakhs and term loan of Rs.152.00 lakhs to the petitioners under SMSE Scheme in March, 2015 with moratorium period of 6 months for the purchase of the 1st petitioner Company from its existing promoters. At the time of take-over of the said Company by the 2nd petitioner, the 1st petitioner was a major supplier of medicine to M/s.Singareni Collieries Company Limited. However, due to reasons beyond the control of the petitioners, production commenced only in September, 2016 though the Company was acquired on 19-06-2015. Repayment schedule started in December, 2015 itself and M/s.Singareni Collieries Company Limited later changed its policy and disqualified the petitioner stating that it did not have minimum Rs.10.00 crores turnover. This caused financial distress to the petitioners.

3. The loan account of the petitioners with the 1st respondent Bank was declared as an NPA on 31-07-2016 and demand notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 01-08-2016. Petitioners claimed to have approached the 1st respondent several times and requested for extension of moratorium period. On 01-11-2016/06.11.2016, they wrote a letter to the 1st respondent explaining their difficulties in paying loan installments and also sought for extension of moratorium by 12 months so that the 1st petitioner can revamp its business and start repaying the loan amount installments.

4. Without considering the said request, the 1st respondent issued possession notice under Section 13(4) of the Act r/w Rule 8(1) of the Security Interest Enforcement Rules, 2002 on 03-03-2017 and took symbolic possession of the subject property, the factory of the petitioners at Jeedimetla, Qutbullapur Mandal, Medchal Malkajgiri District.

5. Physical possession of the property mortgaged i.e. factory with equipment/machinery was taken on 03-05-2017 pursuant to order of the Chief Metropolitan Magistrate, Cyberabad, R.R. District in Crl.M.P.No.343/2017. According to the petitioners, at the time of its seizure, there was a stock of raw material worth Rs.20.00 lakhs and finished stocks worth Rs.20.00 lakhs.

6. On 01-06-2017, the 1st respondent issued notice under Rule 8(6) informing the petitioners that the above property was fixed a reserve price of Rs.2,78,10,000/- and that it proposed to sell the said property by inviting tenders after 30 days from the date of the said notice.

7. Petitioners on 20-10-2017 gave a letter to the 1st respondent seeking regularization of account and withdrawal of seizure of the factory stating that they had paid Rs.12.50 lakhs in September, 2016, that there were Rs.20.00 lakhs worth of raw material and Rs.20.00 lakhs worth of finished stocks at the time of the seizure in the factory premises, and to permit the petitioners to resume operations as the stock would cross the expiry date resulting in huge loss to petitioners. They also made an offer that they would regularize the account by making certain payments.

8. When this was not replied to, they gave another letter on 08-11-2017 also.

9. On 02-07-2018, the 1st respondent issued another notice under Rule 8(6) informing the petitioners that the property would be sold with reserve price of Rs.2.60 crores and thereafter on 20-08-2018, it gave an e-auction sale notice under Rule 9(1) proposing to conduct auction on 11-09-2018.

S.A.No.385 of 2018

10. On 01-10-2018, the 1st petitioner filed S.A.No.385 of 2018 under Section 17 of the Act to declare the said e-auction sale notice dt.20-08-2018 holding auction of the property on 11-09-2018 as illegal, void; to declare the possession notice dt.03-03-2017 without considering representation dt.01-11-2016 as illegal and contrary to Section 13(3A) of the Act and to set it aside; to declare the possess