Procedural violations in auction processes under the SARFAESI Act invalidate proceedings, emphasizing the right of redemption and proper valuation of secured assets.

ORDER

1. Challenging the order passed by Learned Presiding Officer, DRT-II, at Bengaluru, in SA 306/2020 on 27.05.2021, this Appeal is filed.

2. The brief facts leading to this Appeal are that, the Appellants are the Respondent Nos. 2 and 3 in SA 306/2020. First Respondent herein, filed SA 306/2020 under Section 17 (1) of SARFAESI Act , 2002, challenging the action and measure taken by Authorised Officer of Respondent No.2 Bank, under the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as Enforcement Rules, 2002).

3. The prayers made by 1st Respondent in SA 306/2020 were:

i) To set aside the measures initiated by the Respondent Bank under Section 13 of the SARFAESI Act in relation to the Schedule property of the Applicant, inter alia, the attempts to auction Schedule property, pursuant to the notice dated 21.02.2019 issued under Section 13 (4) of the SARFAESI Act ;

ii) Consequently, quash the sale certificate dated 27.03.2019 in No. RRN-1-09533-2018-19 registered in the office of the Sub Registrar, Jayanagara (Rajarajeshwarinagara), Bengaluru, as being in defiance of Rule 8(5) of Security Interest Rules;

iii) Quash the confirmation of sale dated 11.03.2019 issued by the Respondent Bank, as being violative of Rule 9 of Security Interest Enforcement Rules; and

iv) Pass such other orders, as the Tribunal may deem fit to grant in the facts and circumstances of the case.

4. After a detailed enquiry, the SA was allowed by Learned Presiding Officer, DRT-II, Bengaluru, on 27.05.2021.

Therefore, this Appeal is filed by the Auction Purchasers.

5. The following grounds were raised by the 1^st Respondent, Borrower, before DRT:-

i) Notices issued under Sections 13 (2) and 13(4) of SARFAESI Act , 2002, did not specify the right of redemption available to the Borrower:

ii) The valuation of the property not properly fixed i.e., the upset price was fixed erroneously;

iii) There is only one bidder in the auction, i.e. the Appellant No.1, whereas, the Sale Certificate was also issued in favour of Appellant No.2, namely Mrs. Nalini Reddy; and

iv) No proper Sale Notice was issued.

v) Second Respondent Bank cannot invoke SARFAESI Act , 2002.

In view of all these grounds raised, Tribunal below found that, the Respondent Bank has not complied with the mandatory provisions of the Act and Rules. Demand Notice under Section 13 (2) and Possession Notice under Section 13 (4) of the SARFAESI Act , are issued in gross violation of the mandatory provisions, without mentioning Section 13 (8) redemption clause, and without giving an opportunity to the borrower/owner to liquidate the liability as mandated under Section 13 (8) of SARAFAESI Act, 2002. It was also found that the property was not properly valued and there was illegality in issuing Sale Certificate. Other grounds were rejected.

6.1 Learned Senior Counsel for the Appellants submitted that it is true that Rule 3(5) of Enforcement Rules, 2002, requires that Demand Notice may invite attention of borrower to provisions of sub-section (8) of Section (13) of SARFAESI Act , 2002, in respect of the time available to the Borrower, to redeem the secured assets.

6.2 The question is as to whether the Borrower was ready to pay the dues in terms of Section 13 (8) of SARFAESI Act , 2002.

6.3 It is seen from the impugned order in para 7.21 that the 1st Respondent Borrower had not complied with the condition imposed by the Tribunal in IA 346/2019, to make a payment of Rs.75 Lakhs on or before 11.03.2019. When the Borrower was not ready and willing to pay the amount due, it is not now open to her to claim that the proceedings under SARFAESI Act has to fall, for the reason that the right of red