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2025 Supreme(Online)(DRAT) 480
DEBT RECOVERY APPELLATE TRIBUNAL
G. Chandrasekharan, CJ
Mr. V Mathivanan S/o M. Veerappan, Proprietor, M/s MaruthaiVeeran Service Station And M/s Gautham Hallow Bricks – Appellant
Versus
The Branch Manager/ Authorized Officer, Indian Overseas bank, Thirukattuthurai Branch – Respondent
RA (SA) 9/2024
For the Appellants/Petitioners: Senior Counsel Shri Srinath Sridevan for M/s J. Prince and Co.
For the Respondents: Senior Counsel Shri E. Om Prakash for Ms. V. Rajeswari, M/s T. Renu & Co.
Failure to adhere to statutory notice requirements and valuation standards can vitiate property sales under SARFAESI Act.
Headnote:Section 18 of the SARFAESI Act is analyzed, detailing the procedural requirements for sale notices. The case involves the appellants contesting the validation of sale notices due to insufficient notice periods, improper valuation of property, and issues concerning the affixture of sale notices. The court found that the sale notice did not comply with statutory requirements leading to undervaluation and a wrongful sale outcome. The main legal issues revolved around the violation of Rule 9 of the Security Interest (Enforcement) Rules, 2002, and the mandate for a clear 30 days notice. The court ruled that the sale was invalid due to significant procedural irregularities, necessitating a reversal of the lower court's order and the cancellation of the sale.
| Table of Content |
|---|
| 1. jurisdictional basis for appeal under sarfaesi. (Para 1 , 2) |
| 2. violation of statutory notice requirements leading to invalid sale. (Para 3 , 4 , 5 , 6) |
| 3. requirement for proper valuation in asset sales. (Para 7 , 8 , 9 , 10) |
| 4. confirmation of sale requires compliance with statutory pricing mandates. (Para 11) |
ORDER
1. This Appeal is filed under Section 18 of SARFAESI Act , challenging the Final Order dated 12.10.2023 passed in SA 909/2022 by Learned Presiding Officer, DRT, Coimbatore
2. The aforesaid SA No.909/2022 was filed, challenging the Sale Notice dated 3.8.2022 and the sale held on 25.8.2022 and consequent issuance of Sale Confirmation Letter dated 16.9.2022. After contest, SA 909/2022 was dismissed, therefore, this appeal is filed.
3. Learned Senior Counsel Shri Srinath Sridevan for appellants submitted that no clear 30 days time was given for the first Sale Notice dated 17.2.2020. It was served on the appellants on 20.2.2020, fixing the sale on 19.3.2020. It is obvious that no clear 30 days notice was given for the sale as required under Rule 9(1) of Security Interest (Enforcement) Rules, 2002. There have been repeated sale notices dated 5.3.2021, 8.7.2021, 10.5.2022 and 8.6.2022. On the basis of these sale notices, no sale had taken place. The impugned sale notice dated 3.8.2022 was given fixing the auction sale on 25.8.2022 wherein also no 30 days notice was given. Not giving clear 30 days notice from the date of receipt of notice by the appellants and fixing the sale within 30 days of time is against the provisions and rules of SARFAESI Act . Thus, the sale notice, consequent sale and sale confirmation letter are all liable to be set aside. That apart, it is submitted that affixture of notice was not done by Authorised Officer himself. Photograph filed shows that the some lady official of the bank affixed it and therefore, affixture is not proper. The sale was concluded on 25.8.2022 but the balance sale consideration was not paid within 15 days as required under Rule 9(4) of SIE Rules and was paid only on 14.9.2022, which is beyond 15 days.
4. It is further submitted by Learned Senior Counsel that valuation report on the basis of which the upset price was fixed at Rs.1,10,25,000/- was dated 29.4.2022. As per Rule 8(5) of SIE Rules , it is required that valuation report should be obtained prior to every sale. No valuation report was obtained for the sale fixed through sale notices dated 10.5.2022, 8.6.2022 and 3.8.2022. Even in the valuation report dated 29.4.2022, only valuation of land alone was considered and building in the land was not considered for valuation. As per valuation report market value of the land alone was fixed at Rs.1,57,50,000/- but the distress value of the property was fixed at Rs.1,10,25,000/-. The reason stated by the valuer for reducing 30 to 35% of market value and to arrive at distress value cannot be accepted.
5. It is further submitted by the Learned Senior Counsel that appellants made a payment of Rs.35,30,000/- before the Tribunal below, i.e., the amount claimed in the Sale Notice. Without considering this payment, property was sold for Rs.1,10,75,000/- and the balance amount was used toward appropriation of some unsecured debts.
6. It is further submitted by Learned Senior Counsel that when appellants were ready and willing to make payment claimed in the sale notice, sale of the property without following proper procedures, as detailed above, is not in accordance with law and is liable to be set aside.
7. In support of his submissions, Learned Senior Counsel for appellants relied on the order of Hon’ble High Court of Madras in WP No.8020/2017 in re, P. Magudeeswaran Vs. The Authorised Officer dated 17.8.2017, for the proposition that 30 days notice is mandatory. The relevant portion reads as follows:
“31. Once the said legal position is ascertained, the statutory prescription contained in Rules 8 and 9 have also got to be examined as the said rules prescribe as to the
