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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
UJJAL BHUYAN, A. VENKATESHWARA REDDY, JJ.
Bandi Mohan and Another – Petitioners
Versus
Union Bank of India and Others – Respondents
Writ Petition No. 4043 of 2021
Decided On : 02-03-2022
SARFAESI Act - Relaxation of Time Limit - Rule 9 of the Security Interest (Enforcement) Rules, 2002 - [SARFAESI Act] - [Rule 9 of the Security Interest (Enforcement) Rules, 2002] - The court relaxed the rigour of the law in terms of Sub-Rule (4) of Rule 9 due to the extraordinary situation prevailing in the country because of the outbreak of COVID-19 pandemic. The court took judicial notice of the hardship faced by the citizens and directed the respondents to accept the amount paid by the petitioners and issue the sale certificate within fifteen days.
Fact of the Case:
The petitioners participated in an e-auction for a scheduled property under the SARFAESI Act. They deposited 25% of the bid amount on the date of auction and requested an extension to pay the balance due to the COVID-19 pandemic. The balance amount was eventually paid, but there was a delay of 25 days. The respondents refused to issue the sale certificate due to the delay, leading to the filing of the writ petition.
Finding of the Court:
The court found that the respondents were not opposed to accepting the full payment, and no objections were raised in the proceeding. Considering the extraordinary situation due to the COVID-19 pandemic, the court relaxed the time limit prescribed under Sub-Rule (4) of Rule 9 and directed the respondents to accept the amount paid by the petitioners and issue the sale certificate within fifteen days.
Issues: The main issue was the delay in the payment of the balance amount by the petitioners and the refusal of the respondents to issue the sale certificate. The court also considered the impact of the COVID-19 pandemic on the petitioners' ability to arrange necessary finance.
Ratio Decidendi: The court's decision was influenced by the extraordinary situation prevailing in the country due to the COVID-19 pandemic, as well as previous orders and directions from the Supreme Court regarding the extension of limitation periods for judicial and quasi-judicial proceedings. The court took a liberal view and relaxed the time limit prescribed under Sub-Rule (4) of Rule 9, considering the hardship faced by the citizens.
Final Decision: The court directed the respondents to accept the amount paid by the petitioners and issue the sale certificate within fifteen days. The writ petition was disposed of with no costs, and any pending miscellaneous petitions were closed.
Key Points: - The petitioners were highest bidders in e-auction on 19.08.2020, deposited 25% (Rs. 21,68,750) on auction day, and were granted extension till 12.10.2020 for balance 75% (!) (!) (!) (!) . - Petitioners requested further time due to COVID-19, paid full balance (Rs. 86,75,000) on 14.12.2020, 25 days after extended period (!) (!) (!) . - Respondents refused sale certificate due to delay beyond 90 days under Sub-Rule (4) of Rule 9 but had no objection to accepting full payment if court directed (!) (!) . - Rule 9(3) requires 25% payment on auction day; Rule 9(4) requires balance within 15 days of sale confirmation or agreed extension not exceeding 3 months (!) (!) . - Court took judicial notice of COVID-19 hardships, citing Supreme Court orders extending limitations till 28.02.2022 (!) (!) . - Court relaxed Rule 9(4) rigour due to extraordinary COVID-19 circumstances, prior court precedents, and respondents' non-opposition (!) (!) (!) (!) (!) . - Court directed respondents to accept payment, issue sale certificate within 15 days, and register it (!) . - Writ petition disposed with no costs; pending miscellaneous petitions closed (!) (!) .
ORDER :
1. Heard Mr. Alladi Ravinder, learned counsel for the petitioners and Mr. Murali Manohar, learned counsel for respondent Nos. 1, 2 and 3. Insofar added respondent No. 4 (original borrower), he was duly served in terms of the order dated 21.02.2022. But for default, Court decided to proceed ex-parte against him by the aforesaid order.
2. It appears that respondent No. 4 was a borrower of respondent Nos. 1, 2 and 3, but defaulted in repayment of loan for which respondent Nos. 1, 2 and 3 invoked provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘the SARFAESI Act’).
3. In consequence of the above, respondent No. 2 issued sale notice for sale of the scheduled property on 03.08.2020. As per the sale notice, outstanding dues of the borrowers was quantified at Rs. 75,46,576.00. The reserve price of the schedule property was fixed at Rs. 86,25,000.00 and Earnest Money Deposit (EMD) at Rs. 8,62,500.00.
4. E-auction was held on 19.08.2020 in which both the petitioners participated. In fact, petitioners were the highest bidders at their bid amount of Rs. 86,75,000.00. Petitioners deposited 25% of the bid amount (sale amount) of Rs. 21,68,750.00 to the respondents on the date of auction sale which was acknowledged by respondent No. 2 vide the letter dated 20.08.2020. By the said letter, petitioners were called upon to pay the balance 75% of the sale amount within (15) days whereafter the sale certificate would be issued and executed.
5. On request of the petitioners, respondent No. 2 granted time till 12.10.2020 for depositing the balance of the sale amount. Petitioners informed respondent No. 2 by letter dated 27.11.2020 that they could not arrange the necessary finance because of the COVID-19 pandemic, and sought for time till 10.12.2020.
6. Thereafter, petitioners deposited the balance of the sale amount on 14.12.2020. As per the statement of account placed on record, petitioners have paid the entire amount of Rs. 86,75,000.00.
7. Learned counsel for the petitioners submits that there is delay of (25) days in making the entire payment (sale amount) for which respondents Nos. 1, 2 and 2 are not issuing the sale certificate, besides not registering the same.
8. It is with this grievance that the writ petition has been filed.
9. Learned counsel for respondent Nos. 1, 2 and 3 submits that the said respondents have no objection if the Court directs them to accept the full payment. On their own they are unable to do the same in view of the statutory limitation prescribed in Sub-Rule (4) of Rule 9 of the Security Interest (Enforcement) Rules, 2002 (briefly ‘the Rules’ hereinafter).
10. Learned counsel for the petitioner has placed reliance on certain orders of this Court as well as of the Supreme Court and submits therefrom that in view of the peculiar facts and circumstances due to COVID-19 pandemic, Court may take a liberal view and relax the limitation prescribed under Sub-Rule (4) of Rule 9 of the Rules.
11. We have duly considered the submissions made by learned counsel for the parties.
12. Rule 9 of the Rules deals with the time and sale, issue of sale certificate and delivery of possession.
13. As per Sub-Rule (3), the successful bidder shall pay on the same day or not later than the next working day an amount equivalent to 25% of the sale price, inclusive of the EMD to the authorized officer conducting the sale.
14. Sub-Rule (4) says that the balance amount of the purchase price shall be paid by the purchaser to the authorized officer on or before the 15th day of confirmation of sale, or within such extended period which may be agreed upon in writing between the purchaser and the secured creditor. But such extended period should not exceed three months. The consequences of default are laid down in Sub-Rule (5).
15. In the present case, the initial deposit of 25% was made on the day of auction sale i.e. on 19.08.2020. The balance of 75% was paid (25) days later tha
AI
The main legal point established in the judgment is the court's authority to relax statutory time limits, particularly in extraordinary circumstances such as the COVID-19 pandemic, to address the har....
Court while it is true that the statute does mandate and envisage the deposit being made in accordance with the provisions made in sub rule (3), this Court cannot shut its eyes to the unprecedented s....
Point of Law : Court while it is true that the statute does mandate and envisage the deposit being made in accordance with the provisions made in sub-rule (3), this Court cannot shut its eyes to the ....
The extended period for payment after an auction sale should exclude the duration of any stay order, and the threat of forfeiture of deposit should consider the impact of any stay order.
Writ court declines jurisdiction over SARFAESI auction disputes with factual issues; directs to DRT under Section 17.
Compliance with the provisions of the SARFAESI Act, particularly Rule 9(3), is crucial in challenging auction processes, and appellants are not entitled to additional time for making the necessary de....
The main legal point established in the judgment is the interpretation of Rule 9(4) and 9(5) of the Security Interest (Enforcement) Rules, 2002, highlighting the requirement for the purchaser to pay ....
The court emphasized the importance of complying with statutory provisions and ensuring that orders and directions are issued in accordance with the law, while also considering the bona fides of the ....
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