IMPORTANT POINTS
Rules 8 and 9 of the Rules 2002 are mandatory.
Mere delaying tactic cannot be taken to be waiver of borrower’s right to mandatory notice of 30 days.

Headnote:(a) Securitization and Re-construction of Financial Asset and Enforcement of Security Interest (SARFAESI) Act, 2002 – Section 13(8) r/w Rules 8 and 9(1), Securitization and Re-construction of Financial Asset and Enforcement of Security Interest (SARFAESI) Rules, 2002 – Secured assets of the borrower – Can be disposed of only in the manner prescribed under the Act – Borrower has to be given opportunity to take all possible steps for retrieving his property. (Para 13)
       2014 (2) SCALE 331; C.A. No. 3865 of 2014 – Relied upon
       (b) Securitization and Re-construction of Financial Asset and Enforcement of Security Interest (SARFAESI) Rules, 2002 – Rule 8(8) – For sale by any other method than public auction or tender, terms of sale should be settled between the parties – Instantly, no terms settled – Borrower not even called to joint meeting between Bank and purchaser – Rule 8(8) violated. (Para 16)
       (c) Securitization and Re-construction of Financial Asset and Enforcement of Security Interest (SARFAESI) Rules, 2002 – Rules 8 and 9 – Notice of 30 days – Provision mandatory – Rights under rule 9(1) can be waived by borrower – Similarly secured creditor can waive his right under rule 9(3) and (4) – Whether a party has waived its rights depends upon facts of the case. (Para 21, 24)
       2014 (2) SCALE 331; (2013) 10 SCC 83 – Relied upon
       (d) Securitization and Re-construction of Financial Asset and Enforcement of Security Interest (SARFAESI) Rules, 2002 – Rule 9(1) – Delaying tactic by borrower – Cannot be taken to waiver of his right to mandatory notice of 30 days. (Para 28, 29)
       (2011) 14 SCC 770 – Relied upon
       Facts of the case:
       Respondent No. 1 (borrower) herein had taken loan from Syndicate Bank. Because of its default in repaying the said loan, the bank took action under the provisions of the Securitization and Re-construction of Financial Asset and Enforcement of Security Interest Act, 2002 (SARFAESI Act). After taking formal possession of the mortgaged property which was given as a surety for due discharge of the loan, the said property was put to sale.
       The appellant’s bid was accepted being highest resulting into issuance of the sale certificate. The borrower challenged the said sale before the Debt Recovery Tribunal (DRT). This application was dismissed. The borrower filed Writ Petition before the High Court which was dismissed.
       The Division Bench allowed the LPA and set aside the sale of the property in favour of the appellant on the ground that the public notice issued for the said sale was defective as 30 days time which is mandatorily required under Rules 8 and 9 of SARFAESI Rules was not given.
       Finding of the Court:
       There is no infirmity in the impugned judgment.
       Result: Appeals dismissed.

JUDGMENT

A.K. SIKRI, J.

1. Leave granted.

2. Respondent No. 1 herein had taken loan from Syndicate Bank (hereinafter to be referred as the 'Bank'). Because of its default in repaying the said loan, the bank took action under the provisions of the Securitization and Re-construction of Financial Asset and Enforcement of Security Interest Act, 2002 (SARFAESI Act). After taking formal possession of the mortgaged property which was given as a surety for due discharge of the loan, the said property was put to sale.

The appellant herein was the highest bidder whose bid was accepted resulting into issuance of the sale certificate. Respondent No. 1 (hereinafter referred to as the 'borrower') challenged the said sale by filing application before the Debt Recovery Tribunal (DRT). This application was dismissed. The borrower filed Writ Petition before the High Court of Karnataka against the order of DRT. The learned Single Judge dismissed the Writ Petition as well. Undeterred, the borrower appealed against the order of the learned Single Judge.

This time it triumphed, as the Division Bench has set aside the sale of the property in favour of the appellant. The reason given is that the public notice issued for the said sale was defective as 30 days time which is mandatorily required under Rules 8 and 9 of SARFAESI Act was not given. Concededly the public notice was published in the newspaper on 28.4.2006, fixing the date for sale as 8.5.2006, inviting tenders from prospective buyers at 2.00 p.m. on 6.5.2006.

3. This fact that insufficient notice was given, is, therefore, not in dispute. Legal position about the mandatory nature of Rule 8 & 9 is also not agitated. Notwithstanding this legal possession, the appellants viz auction purchaser as well as the Bank maintain that the sale was valid because of the reason that delay was entirely attributable to the borrower who by its conduct waived the said mandatory requirement of the Rules. In this backdrop, the question that arises for consideration is as to whether there could be a waiver of the aforesaid mandatory condition? If so, whether this waiver can be discerned in the present case? Before we answer these questions it would be apposite to have a thorough glimpse of the facts on record.

4. The borrower had availed a loan of Rs. 1,84,70,000/-. This loan was obtained from the bank to construct a hotel in a prominent place in Belgaum. The borrower has constructed the hotel at the said place for a land measuring 1825.25 sq. mtrs. with a built up area of 4749.64 sq. mtrs. At the time of sanction of the loan, the premises were valued at Rs. 3.16 crores. As mentioned above, the borrower committed default in the repayment of these financial facilities granted to it. Notice under Section 13(2) of the SARFAESI Act to take formal possession of the property was issued. Thereafter, the Authorised Officer of the Bank (Respondent No. 2) under SARFAESI Act proceeded to sell this property. Property could not be sold in the first attempt and the efforts were fructified only when it was put to auction third time. Since the earlier endeavour made by the Authorised Officer are used as shield against the borrower's attack on sale in question, it becomes necessary to take a note of these attempts as well.

5. First notice for auction was published on 11.9.2004 fixing the auction date as 15.10.2004. Reserve Price was fixed at Rs. 3.50 crores. This notice, admittedly, was for more than 30 days. At that stage, the borrower filed the Writ Petition in the High Court challenging the said notice 3 days before the proposed sale i.e. on 12.10.2004. Though the High Court did not grant stay against the scheduled auction, it granted stay against confirmation of sale. As per the appellant, in view of the said partial stay order, nobody came forward to participate in the auction and the exercise went into futility.

6. The Writ Petition filed by the borrower was dismissed by the High Court on 28.2.2005 upholding notice dated 27.7.2004 is

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2014 Supreme(SC) 326

IMPORTANT POINTSRules 8 and 9 of the Rules 2002 are mandatory. Mere delaying tactic cannot be taken to be waiver of borrower’s right to mandatory notice of 30 days.

Cases Referred (3)

IMPORTANT POINTS
Rules 8 and 9 of the Rules 2002 are mandatory.
Mere delaying tactic cannot be taken to be waiver of borrower’s right to mandatory notice of 30 days.