Madhya Pradesh High Court
M/S Utkarsh Industries Pvt. Ltd. vs State Bank Of India on 5 July, 2018
Author: P.K. Jaiswal
Bench: S.K. Awasthi, P.K. Jaiswal
1
WP No.12021/2018
HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE
D.B.: Hon'ble Shri P.K. Jaiswal
Hon'ble Shri S.K. Awasthi, JJ.
Writ Petition No.12021/2018
Satyanarayan Rathi s/o Late Ratanlal Rathi & others
Versus
State Bank of India, SME Industrial Finance Branch,
Khel Prashal, Indore
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Shri Ajay Bagadia, learned counsel along with Shri Arpit Oswal,
learned counsel for the petitioners.
Shri Amit S. Agrawal, learned Senior Counsel along with Shri R.C.
Sinhal, learned counsel for the respondent / State Bank of India.
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ORDER
(Passed on this 5th day of July, 2018) Per P.K. Jaiswal, J.
By this writ petition under Article 227 of the Constitution of India, 1950, the petitioners are challeng ing order dated 08.03.2018 (Annexure P/1) passed by the Debts Recovery Appellate Tribunal, Allahabad in Ap peal No.77/2016 by which the learned Appellate Tribunal set aside order dated 10.03.2016 (Annexure P/2) passed by the Presiding Officer, Debts Recovery Tribunal, Ja balpur, whereby Securitization Application No.87/2013 was allowed, by allowing the appeal of the respondent - State Bank of India filed under Section 18 of the Securiti sation and Reconstruction of Financial Assets and En forcement of Security Interest Act, 2002 (herein after re ferred to as the SARFAESI Act, 2002).
2. The petitioners are guarantors of various loan and credit facilities sanctioned by the respondent -
2 WP No.12021/2018Bank. The respondent - Bank had sanctioned various credit facilities to M/s. Utkarsh Industries Private Lim ited Company registered under the provisions of Indian Companies Act, 1956. In order to secure the said loans, equitable mortgage was created over immovable proper ties belonging to the petitioners. Since the repayment of loan was not made in terms of the loan agreement, the account of the petitioner (s) was classified as Non Per forming Asset (NPA) in terms of Reserve Bank of India's directives and the proceedings under the SARFAESI Act, 2002 were initiated. The demand notice under Section 13 (2) of the SARFAESI Act, 2002 was issued on 17.12.2012 demanding a sum of Rs.30,46,29,280/- out standing as on 30.11.2012. The borrowers did not pay the loan in pursuance of the demand notice and their re quest for rescheduling the loan did not find favour of the respondent - Bank. As they did not comply with the said demand notices, after taking symbolic possession of the respective assets / properties, physical possession of some of the properties under order dated 12.06.2013 passed by the District Magistrate, Sehore and under or der dated 23.07.2014 passed by the District Magistrate, Indore under Section 14 of the SARFAESI Act, 2002 was also taken.
3. In notice dated 17.12.2012 (Annexure P/6), de tails of the mortgaged properties (Serial No.i to xi) have been categorically given. The petitioners have received notice under Section 13 (2) of the SARFAESI Act, 2002.
3 WP No.12021/2018A corrigendum dated 22.02.2013 (Annexure P/16) to no tice dated 17.12.2012 was restricted only to Plot No.27, 28, 30, 78, 79, 159 of Gokul Nagar, Indore owned by Smt. Jaishree Rathi w/o Dwarka Das Rathi, Satya narayan Rathi s/o Late Ratanlal Rathi, Saurabh Somani s/o Radheshyam Somani, Sarveshwar Rathi s/o Ratanlal Rathi, Dwarkadas Rathi s/o Ratanlal Rathi, Smt. Sura jkanta Rathi w/o Sarveshwar Rathi respectively which were mortgaged with the respondent - Bank as collateral security for the loan granted in favour of M/s. Utkarsh Industries Private Limited. Due to change in the size and re-location of the properties situated at Gokul Na gar, Indore, corrigendum was issued on 22.02.2013.
4. According to the respondent - Bank, the peti tioners were well aware of the reduction in size of their plots, relocation of their plots vis-à-vis payment of com pensation to them by the State in lieu thereof, but at no point in time, they informed this factual aspect to the Bank and as such, in good faith and without negligence, initial notice under Section 13 (2) of the SARFAESI Act, 2002 was issued to clarify the ownership of various peti tioners on plots mortgaged to the Bank. The corrigen dum was limited to only six plots situated at Gokul Na gar, Indore, which was published in the newspaper on 19.03.2013. Possession under Section 13 (4) of the SAR FAESI Act, 2002 was issued on 26.02.2013 for the re maining seven properties. Physical possession of the properties belonging to the company was taken on 4 WP No.12021/2018 29.06.2013 with the assistance of District Magistrate. Notice for sale of secured assets and immovable proper ties was published on 05.04.2013 fixing auction of the same for 08.05.2013. The Bank had also published pho tographs of the petitioners in the newspaper on 07.01.2013 (Annexure P/8).
5. The petitioners challenged the proceedings of the Bank before the Debts Recovery Tribunal, Jabalpur, stating inter alia that the publication of the photographs was uncalled for and no notice to the corrigendum was served upon them along with other objections. The Debts Recovery Tribunal, Jabalpur vide order dated 10.03.2016 (Annexure P/2) set aside the action initiated by the respondent - Bank and also awarded compensa tion by directing the Bank not to charge interest and other costs from the borrowers with effect from the date of demand notice i.e. 17.12.2012 and to return the pos session of the secured assets to the borrowers. Para graphs No.11 to 15 of order dated 10.03.2016 (Annexure P/2) passed by the Debts Recovery Tribunal, Jabalpur read, as under: -
"11. The demand notice under Section 13 (2) has been assailed on the ground that a Corrigendum was issued subsequent to issuance of demand no tice dated 17.12.2012 and there is no provision for making such corrigendum. It is seen that the de mand notice dated 17.12.2012 was issued by the re spondent bank, the service of which has not been disputed by the applicants. The respondent bank thereafter issued a corrigendum dated 22.02.2013 which was actually published in the newspaper on 19.03.2013. The respondent bank in the meantime took the symbolic possession by issuance of notice 5 WP No.12021/2018 dated 26.02.2013 which was subsequently pub lished in the newspaper on 02.03.2013 under Sec tion 13 (4) of the SARFAESI Act. The receipt of possession notice is not being disputed by the ap plicant. However, his submission is with regard to the fact that the corrigendum which was published in the newspaper on 19.03.2013 could not have been issued there being no provision for issuance of such corrigendum and also that even in case it is assumed that the respondent bank could have done so, the same should have been served upon all the borrowers extending the time of 60 days. Counsel for the respondent has vehemently argued that the corrigendum virtually had no effect on the status of the demand notice as the corrigendum was merely related to the subsequent development (after the mortgage was created) in the size and location of the plots as the same were changed by the Devel oper and which fact came to the notice of the re spondent bank when physical inspection of the mortgaged properties was carried out and informa tion in this regard was sought from the Developer / Society.
12. It has been consistently held by the superior courts that the provisions of SARFAESI Act, 2002 and Security Interest (Enforcement) Rules, 2002, being stringent, are required to be strictly followed and wide powers of the secured creditor cannot ex ercised arbitrarily and whimsically and enforce ment of security interest in secured asset by a se cured creditor should strictly be in conformity with the provisions. Following these principles leads us to the only irrefutable conclusion that action of the respondent Bank was illegal as the change in par ticulars of the mortgaged property can, by no means, be said to be immaterial. Even if, for the sake of arguments, it is assumed so, the only option available with the bank was to withdraw the de mand notice and then to issue a fresh demand no tice under Section 13 (2) there being no provision for issuance of a corrigendum. Even if it is as sumed that issuance of corrigendum was permissi ble, there is no escape from the conclusion that af ter service of the same upon the applicants, as pro vided under Section 3 of the Security Interest (En forcement) Rules, 2002, a fresh period of 60 days should have been tendered to the applicants in or der to enable them to repay their dues which was 6 WP No.12021/2018 not done. It is an admitted fact that the corrigen dum was not even delivered or transmitted to the applicants and instead was published in only one newspaper that too after the taking over of sym bolic possession. It is interesting to note that pur suant to demand notice dated 17.12.2012, the sym bolic possession was taken prior to publication of corrigendum to the said demand notice.
13. The overt act of the respondent bank by pub lication of the photographs of all the borrowers and guarantors in several newspapers even before ex piry of 60 days period, despite there being no rules or provisions to do the same, is extremely de plorable and smells of personal vengence. The de cision to public the photographs of the applicants can only be said to be an act of over enthusiasm and misadventure and by this act of theirs, the re spondent bank in fact, while attempting to recover their dues, diminished the chances of the same on their own by tarnishing the image and reputation of the applicants, the importance of which factors, in the industry sector, cannot be undermined.
14. With regard to other issues relating to hy pothecated stocks, it is seen that this Tribunal vide interim orders had directed the applicants to take over the same after paying certain amount to the respondent bank. The issue, therefore, does not re quire any further deliberations.
15. As far as the issue of compensation to the ap plicants is concerned, though the applicants have sought to huge amount without elaborating the same, I feel that the applicants would be ade quately compensated if the bank is restrained from levying upon them the interest, other charges and costs w.e.f. 17.12.2012, the date when demand no tice under Section 13 (2) was issued to applicants.
On a conspectus of all the materials placed before me, I feel it just and proper to direct as un der: -
(a) The demand notice under Section 13 (2) dated 17.12.2012, the Possession notice dated 26.02.2013 and subsequent corrigendum published on 19.03.2013 being illegal im proper and unsustainable are hereby quashed.
(b) All the subsequent proceedings and actions pursuant to demand notice dated 17.12.2012 7 WP No.12021/2018 and Possession Notice dated 26.02.2013 are also set aside.
(c) The respondent bank shall return the posses sion of all the secured assets as mentioned in the demand notice dated 17.12.2012 to the applicants forthwith.
(d) The prayer of the applicants seeking compen sation from the respondent bank is allowed under Section 19 of the SARFAESI Act, 2002 only to the extent that the respondent bank shall not charge the interest, other charges and costs etc. from the applicants w.e.f. 17.12.2012, the date when demand notice un der Section 13 (2) was issued to the appli cants.
With the above observations, the present SA stands finally disposed off."
6. The respondent - Bank challenged order dated 10.03.2016 (Annexue P/2) passed by the Debts Recovery Tribunal, Jabalpur by filing an appeal under Section 18 of the SARFAESI Act, 2002 on the ground that there were 13 properties which were described in the demand notice dated 17.12.2012, but while inspecting the site for six plots, it was found that the areas and the boundaries of those plots were changed by the Developer Society. This fact was well within the knowledge of the petition ers, but they had not conveyed the same to the Bank. Af ter getting confirmation from the Developer Housing So ciety, a corrigendum was issued for those six plots and symbolic possession of other seven properties was taken on 26.02.2013, whereas the possession of those six plots was taken on 15.01.2015 after completion of the formali ties. Thus, the Debts Recovery Tribunal has erred in concluding that the possession was taken before publica tion of the corrigendum. It was also urged that there was 8 WP No.12021/2018 no change in the amount of the demand notice or in the details of the properties, but it was only a change in the size and boundaries of the properties, so there was no need to issue fresh demand notice under the provisions of the SARFAESI Act, 2002 and the rules framed there under nor there is any violation of the mandatory provi sions of the statute and regulations.
7. The learned Appellate Tribunal, after appreci ating the arguments of the learned counsel for the par ties, allowed the appeal by giving following findings in paragraphs No.8 to 18 of order dated 08.03.2018 (An nexure P/1), which read, as under: -
"8. Having heard the learned counsels for the parties and considering the material available on record, there is no dispute on the point that 13 properties were described in schedule-c of the de mand notice dated 17.12.2012 and the corrigendum was issued on 22.02.2013 for six plots situated at Gukul Nagar, Indore, which was published in the newspaper on 19.03.2013. The symbolic posses sion was taken on 26.02.2013 of the remaining seven properties excluding these six plots, which is evident from the possession notice placed at Page No.316 of the paper book. The photographs of the borrowers were also published in the Newspaper. Though, it was averred by the Bank that the corri gendum was sent to the borrowers through Regis tered Post, but there appears to be no proof to this effect on the record.
9. In the above backdrop, the questions for con sideration are as to-
(i) whether the Bank was justified in publishing the photographs of the borrowers in the newspaper?
(ii) whether the Bank could segregate the prop erties for taking possession from properties mentioned in the demand notice and also that there was any requirement to issue fresh demand notice?
9 WP No.12021/201810. So far as the publication of photographs is concerned, the standard convenant agreed by the borrowers is placed on record at Page No.150 of the paper book, which reads as under: -
"In case of default in repayment of the loan / advances or in the payment of the interest thereon or any of the agreed installments of the loan on due dates by the borrower, the bank and / or the RBI will have an unquali fied right to disclose or publish the borrower's name or the name of the borrower's company and its directors / partners / members / pro moters as defaulter in such manner and through such medium as the Bank or the RBI in their absolute discretion may think fit."
11. Thus, in view of the above, the Bank had right to disseminate the information about default ers to the public at large in the manner as it deems proper. The demand notice for a sum of Rs.30,46,29,280/- was issued and the borrowers had not paid any heed to the request made by the Bank for repayment of the same. Hence, in my opinion, the Bank was justified to publish the pho tographs of the willful defaulters. This view is for tified by the principles laid down in the judgments of Ku. Archana Chouhan v. State (supra), Re vati Cements Private Limited v. Allahabad Bank (supra) and Monal Dineshbhai Chokshi and 2 v. State Bank of India & 1 (supra), wherein it has been held that the publication of photographs of the borrowers cannot be said to be impermissible mode and the publication with the discretion of the Bank may in turn include with the photograph. Therefore, the appellant - Bank was well within its right to publish the photographs and I find no illegality caused by the Bank on this as pect.
13. It is to be noted that the Tribunal below had held that the possession of the property was taken before publication of corrigendum, but the finding is not factually correct. As the publication of corri gendum was with regard tot he six properties, the possession thereof was not taken on 26.02.2013, but it was taken later on 15.01.2015. So, after pub lication of corrigendum on 19.03.2013, there was ample time with the borrowers to deposit their dues with the Bank, if they so wished, but no step was taken except writing various letters to the 10 WP No.12021/2018 Bank and admitting the liability, which is evident from one of the letters dated 23.03.2013, placed at page no.231 of the paper book. Therefore, there is no irregularity in taking possession of seven prop erties by the Bank.
14. The fact of publication of corrigendum was within the knowledge of the borrowers. Though there was no proof that the corrigendum dated 22.02.2012 was served upon the borrowers, but in my considered view, there was no necessity to serve the same on the borrowers. Actually, this corrigendum was only with regard to the six prop erties qua the size and boundaries thereof. So, nei ther there was a change in the amount of the de mand notice nor it was a change in the description of the properties. Therefore, it cannot be termed as any amendment or modification in the original demand notice. The corrigendum was issued for the public in general and not for the borrowers, as the borrowers were already aware about the fact. It was their duty to convey the changed facts to the Bank. And if earlier, it was not conveyed, then they should have responded to the demand notice stat ing the correct position of the size and boundaries of the plots, but they deliberately concealed this fact, so they cannot be permitted to take the benefit of their own misdemeanor.
15. In the instant case, the issuance of corrigen dum does not invoke the provisions and proce dures laid down in Rules 3 (3) and 3 (A) (B) of the Security Interest (Enforcement) Rules, 2002. Rule 3 (3) is applicable only when any other notice is is sued by the secured creditor and Rule 3 (A)(b) pro vides for issuance of notice if there is any amend ment or modification made by the Bank on consid eration of the representation submitted by the bor rowers. But here in this case, no representation to this effect was made by the borrowers before the Bank and it was not in the form of any modifica tion or amendment nor any other notice was is sued, but only a corrigendum was issued to clarify the size and boundaries of some of the properties mentioned in the demand notice. Thus, a period of sixty days cannot be counted from the date of cor rigendum or from the date of publication of the corrigendum, as it has no substantial change in the original demand notice. The notice dated 17.12.2012 under Section 13 (2) of the SARFAESI 11 WP No.12021/2018 Act, 2002 was property served upon the borrowers and after providing requisite period of more than 60 days, the possession of the properties was taken on 26.02.2013. Therefore, the findings of the Tri bunal below on both these issues are not sustain able.
16. The Tribunal below has not only set aside the proceedings initiated by the Bank, but also found it proper to award the compensation to the borrow ers by directing the Bank not to charge the interest from the date of demand notice. Though, the Tri bunal may award the compensation in its discre tion provided under Section 19 of the SARFAESI Act, 2002, but the discretion is required to be exer cised judiciously and there should be cogent rea sons for determination of the amount of compen sation and / or cost, but in the present matter, no specific reasons were assigned to arrive at the con clusion for not allowing the interest on this huge amount from the date of demand notice till indefi nite period. So, the conclusion of the Tribunal be low on this aspect also cannot be said to be proper and logical.
17. In view of the above, the appeal is allowed and the impugned order dated 10.03.2016 passed by the Tribunal below is quashed and set aside. No order as to costs.
18. A copy of this judgment be forwarded to the parties as well as to the DRT concerned.""
8. Shri Ajay Bagadia, learned counsel for the peti tioners has submitted that after receipt of the demand notice, a representation was made on 12.02.2013 (An nexure P/11) and as per Rule 2 (a) of the Security Inter est (Enforcement) Rules, 2002 (herein after referred to as the Rules, 2002), the same has to be decided by the Authorized Officer, as defined therein, but the same has been decided by the Relationship Manager (ME), SME Branch, Indore of the respondent - Bank on 20.02.2013 (Annexure P/12).12 WP No.12021/2018
9. He has also drawn our attention to the provi sions contained in Section 13 (2) & 13 (4) of the SAR FAESI Act, 2002 and Rule 3A (b) of the Rules, 2002; and submitted that if on examining the representation made or objection raised by the borrower, the secured creditor is satisfied that there is a need to make any changes or modifications in the demand notice, he shall modify the notice accordingly and serve a revised notice or pass such other suitable orders as deemed necessary, within seven days from the date of receipt of the representation or objection.
10. He submitted that there is no compliance of mandatory provisions of the SARFAESI Act, 2002 and the Rules of 2002, and this aspect of the matter has not been considered by the learned Appellate Tribunal while considering order dated 10.03.2016 (Annexure P/2) passed by the Debts Recovery Tribunal, Jabalpur.
11. His contention is that demand notice dated 17.12.2012 (Annexure P/6) was amended on 19.03.2013 (Annexure P/16), but the same was never communicated and amended notice i.e. corrigendum was published in the newspaper, with an object to deceive the petitioners. His submission is that amended notice has been ante dated 22.02.2013, but actually the same was published in the newspaper on 19.03.2013.
12. According to Rules, 2002, if demand notice is amended, then fresh opportunity on dues is required to be given by submitting representation. As no service of 13 WP No.12021/2018 any corrigendum was made to the petitioners, the action is illegal; and prayed that the impugned order be setting aside by allowing the writ petition filed by the petitioners under Article 227 of the Constitution of India.
13. Shri Amit S. Agrawal, learned Senior Counsel for the respondent - Bank has drawn our attention to demand notice dated 17.12.2012 (Annexure P/6), which was issued under Section 13 (2) of the SARFAESI Act, 2002 and corrigendum dated 19.03.2013 (Annexure P/16), so also representation / objection of the petition ers dated 12.02.2013 (Annexure P/11) and submitted that the same is nothing but a request for further loan and re-habitation / reconstruction of the company. He submitted that proposal / representation, which was made by the petitioners, has been rejected on 20.02.2013 (Annexure P/12) by the Relationship Manager on the ground that the account has already turned NPA on 16.12.2012.
14. To appreciate the arguments, we quote the proposal made in the representation, which reads, as un der: -
"PROPOSAL OF THE COMPANY:
In view of the above facts and circumstances and past Four Decade sound financial track records of the Promoter / Company, coupled with the fact that even as on the date, the Bank is having security worth more than Rs.30,00 Crores detailed as above, it is humbly submitted and prayed that, Bank being our debt partner, who has always stood with Company, may immediately sanction and disburse enhanced working capital of Rs.10.00 Crores as well as disburse, bal ance amount of Rs.201.70 crores out of 14 WP No.12021/2018 sanctioned Term Loan, out of which Rs.5.00 Crores may be directly re-deposited to square of Ad-hoc facility of Rs.5.00 Crores and balance will help us to revive the working which will take care of regular in terest payments and installment towards loan repayment.
Our Company is submitting herewith the proposal for rehabilitation of the Working Capital and Term Loan which will help the Company to regularize the Account. The detailed proposal is enclosed herewith."
15. By order dated 20.02.2013 (Annexure P/12), the representation of the petitioners has been rejected, which reads, as under: -
"Wherein receipt of your letter dated 12.02.2013 (received by us on 14.02.2013). In this connection we have to advise as under: -
Your request for sanction of enhanced working capital of Rs.10.00 crs. and further disbursal of Rs.2.01 Cr. of Term Loan (Phase-II) cannot be considered by us due to the reason that despite our repeated reminders you have not regularize the CC and Term Loan Accounts and the subsequent ac tions taken by us under Section 13 (2) of SAR FAESI Act, 2002 as the account has already turned NPA on 16.12.2012."
16. He has also drawn our attention to sub-section (3) of Section 13 of the SARFAESI Act, 2002 and submit ted that in the demand notice, the Bank has to give de tails of the amount payable by the borrower and the se cured assets. The contention of the learned Senior Coun sel for the respondent - Bank is that there is no change in the amount which was lying outstanding as mentioned in the demand notice dated 17.12.2012. After issuance of the demand notice, the description of the property i.e. 15 WP No.12021/2018 size of the property has been changed and just to avoid further complications in the auction of the properties, corrigendum was issued, so that at the time of auction, prospective buyers must know the exact details and size of the properties / plots, which have been mortgaged with the Bank. He submitted that all these details, which have been mentioned in the corrigendum, have to be in formed by the petitioners as they failed to inform the aforesaid details, and therefore, corrigendum was issued. He further submitted that at present the outstanding dues is around ninety crores and not a single penny has been paid by the petitioners after 17.12.2012. There is no violation of any of the provisions of SARFAESI Act, 2002 and Rules, 2002 made thereunder.
17. In respect of publication of photographs of the petitioners in newspaper is concerned, he submitted that as per standard covenant agreed by the petitioners and the Bank, the Bank and / or RBI will have an unqualified right to disclose or publish the borrower's name or the borrower's company and its Director / Partners / Mem bers / Promoters as defaulter in such manner and through such medium as the Bank or the RBI in their ab solute discretion they may think fit. Thus, there is no le gal issue in the matter; and prayed for dismissal of the writ petition.
18. We have heard the learned counsel for the par ties and perused the record.
16 WP No.12021/201819. In the demand notice, 13 properties were men tioned and the possession of 7 properties was taken on 26.02.2013. Publication of the corrigendum was with re gard to 6 properties, possession thereof was not taken on 26.02.2013, but it was later taken on 15.01.2015, i.e. much after publication of the corrigendum on 19.03.2013. In between there was ample time with the borrowers to deposit their dues with the Bank, if they so wished, but no step was taken except writing various let ters to the Bank and admitting the liability, which is evi dent from one of the letters dated 23.03.2013. Thus, there is no irregularity in taking possession of 7 proper ties by the Bank.
20. It is not in dispute that out of 13 properties, size and boundaries of 6 properties have been changed later on and this was never informed by the borrower. There was no change in the amount of the demand notice nor it was a change in the description of the properties. Therefore, the learned Appellate Tribunal has rightly held that it cannot be terms as any amendment or modi fication in the original demand notice. The corrigendum was issued for the public in general and not for the bor rowers, as the borrowers were already aware about the fact. It was their duty to convey the changed facts to the Bank. If we go through the provisions and procedures laid down in Rule 3 (3) and 3 (A) (b) of the Rules, 2002, it is very clear that Rule 3 (3) is applicable only when any other notice is issued by the secured creditor and Rule 3 17 WP No.12021/2018 (A) (b) provides for issuance of notice if there is any amendment or modification made by the Bank on con sideration of the representation submitted by the bor rowers. In the present case, no representation to this ef fect was made by the borrower before the Bank and it was not in the form of any modification or amendment nor any other notice was issued, but only a corrigendum was issued to clarify the size and boundaries of some of the properties mentioned in the demand notice. Thus, there is no substantial change in the original demand no tice. Corrigendum dated 19.03.2013 is in the nature of correction, and therefore, it does take to the demand no tice correct, and therefore, the same was issued.
21. The purpose of serving the notice upon the borrower under sub-section (2) of Section 13 of the SAR FAESI Act, 2002 is that reply may be submitted by the borrower explaining the reasons as to why measure may not be taken under sub-section (4) of Section 13 of SAR FAESI Act, 2002. In case of non-compliance of notice within sixty days under sub-section (2) of Section 13 of the SARFAESI Act, 2002, it is incumbent upon the se cured creditor to serve sixty days notice before proceed ing to take any of the measures, as provided under sub- section (4) of Section 13 of the SARFAESI Act, 2002. Af ter service of notice, if borrower raises any objection or states facts for consideration of the secured creditors, such reply to the notice must be considered with the ap plication of mind and the reasons for not accepting the 18 WP No.12021/2018 objection, however, must be communicated to the bor rower.
22. Learned Senior Counsel for the respondent - Bank has drawn our attention to paragraphs No.10 to 15 of Division Bench decision dated 05.02.2010 of Delhi High Court in the case of State Bank of India v. Hon'ble Debts Recovery Appellate Tribunal & others, Writ Petition (C) No.9090/2009, which read, as under: -
"10. The second limb, however, is the consequence of non-specification of this amount. In this behalf, learned counsel for the petitioners emphasized that a bare reading of the proforma would show that the specification set out are for the benefit of the auc tion purchaser. This is clear from clause (f), which requires any other material to be stated in the auc tion notice, which is material for a purchaser to know in order to judge the nature and value of the property. In the present case, it is, thus, pleaded that the auction purchaser is not making any griev ance and the mortgagor should not be permitted to make a grievance in this behalf.
11. Learned counsel for the petitioners seeks to draw strength from the observations of the Supreme Court in Saheb Khan v. Mohd.
Yousufuddin & Ors., (2006) 4 SCC 476, wherein the Apex Court while dealing with an auc tion under the Civil Procedure Code, 1908 (for short, "the Code‟) observed as under :-
"12. We are unable to sustain the reasoning of the High Court. Order 21 Rule 90 of the Code of Civil Procedure allows, inter alia, any person whose interests are affected by the sale to ap ply to the court to set aside a sale of immovable property sold in execution of a decree on the ground of "a material irregularity or fraud in publishing or conducting" the sale. Sub-rule (2) of Order 21 Rule 90 however places a fur ther condition on the setting aside of a court sale in the following language:19 WP No.12021/2018
"90.(2) No sale shall be set aside on the ground of irregularity or fraud in publishing or con ducting it unless, upon the facts proved, the court is satisfied that the applicant has sus tained substantial injury by reason of such ir regularity or fraud."
13. Therefore, before the sale can be set aside merely establishing a material irregularity or fraud will not do. The applicant must go fur ther and establish to the satisfaction of the court that the material irregularity or fraud has resulted in substantial injury to the applicant. Conversely even if the applicant has suffered substantial injury by reason of the sale, this would not be sufficient to set the sale aside un less substantial injury has been occasioned by a material irregularity or fraud in publishing or conducting the sale. (See Dhirendra Nath Gorai v. Sudhir Chandra Ghosh (1964) 6 SCR 1001 : AIR 1964 SC 1300; Jaswantlal Natvar lal Thakkar v. Sushilaben Manilal Dangar wala, 1991 Supp (2) SCC 691 and Kadiyala Rama Rao v. Gutala Kahna Rao, (2000) 3 SCC 87).
14. A charge of fraud or material irregularity under Order 21 Rule 90 must be specifically made with sufficient particulars. Bald allega tions would not do. The facts must be estab lished which could reasonably sustain such a charge. In the case before us, no such particu lars have been given by the respondent of the alleged collusion between the other respon dents and the auction-purchaser. There is also no material irregularity in publishing or con ducting the sale. There was sufficient compli ance with Order 21 Rule 67(1) read with Order 21 Rule 54(2). No doubt, the trial court has said that the sale should be given wide public ity but that does not necessarily mean by publi cation in the newspapers. The provisions of Or der 21 Rule 67 clearly provide if the sale is to be advertised in the local newspaper, there must be specific direction of the court to that effect. In the absence of such direction, the proclama tion of sale has to be made under Order 21 Rule 67(1) "as nearly as may be, in the manner prescribed by Rule 54 sub-rule (2)". Rule 54 sub-rule (2) provides for the method of publi cation of notice and reads as follows :-
20 WP No.12021/2018"54.(2) The order shall be proclaimed at some place on or adjacent to such property by beat of drum or other customary mode, and a copy of the order shall be affixed on a conspicuous part of the property and then upon a conspicuous part of the courthouse, and also, where the property is land paying revenue to the Govern ment, in the office of the Collector of the district in which the land is situate and, where the property is land situate in a village, also in the office of the Gram Panchayat, if any, having ju risdiction over that village."
12. The submission, thus, is that a mere irregu larity should not be permitted to nullify and defeat the rights of the auction purchaser for whose bene fits the proforma enlists certain requirements. Not only that, there is no injury, which has occurred to the mortgagor nor is it pleaded.
13. Learned counsel for the mortgagor, on the other hand, contends that the mandatory require ment has not been complied with, which must nul lify the auction notice. Learned counsel referred to the judgment of the Division Bench of the Madras High Court passed in W.P. No. 9729 of 2009 titled "K. Raamaselvam & Ors. V. Indian Overseas Bank & Ors.‟ on 29.07.2009 to contend that it is not open for the secured creditor to plead that a vi olation is technical and, thus, need not be complied with. This is, of course, apart from relying on the judgment in Manoj D. Kapasi & Anr.'s case (supra).
14. We have perused the judgment in Manoj D. Kapasi & Anr.'s case (supra) wherein the matter dealt with the right of redemption available to a mortgagor, which is so available till sale or transfer takes place. The emphasis was on Section 13(8) of the said Act, which reads as under :-
"13. Enforcement of security interest. -- ........................
(8) If the dues of the secured creditor to gether with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured credi tor, and no further step shall be taken by him for transfer or sale of that secured as set."21 WP No.12021/2018
It was pleaded that the mortgagor has a right of re demption. The plea advanced was that no notice as required under Rule 8(6) of the said Rules was given to the petitioners therein and the notice of sale published was defective being in breach of Rule 9(1) of the said Rules because it gave only five days for the bid to be received. Thus, if rights of the borrowers are to be protected, it must be inter preted and enforced in a manner to facilitate the party concerned to redeem the property. Thirty days had not been provided as per Rule 8(6) of the said Rules. It was in that context observed that Rule 8(6) and also Rule 9(1) of the said Rules are mandatory and are clearly to be followed by the Bank.
23. On due consideration of the aforesaid, so also the findings recorded by the learned Appellate Tribunal, we are of the view that the corrigendum is nothing but a correction of the demand notice, but size, boundaries and description of 6 properties which has necessitated because after mortgage of the aforesaid properties, a part of the same was acquired and this fact was never com municated by the petitioners, and therefore, the same was issued just to intimate the correct facts of the prop erties to the prospective buyers to cut short the litigation.
24. The demand notice was issued on 17.12.2012, but till today, no amount has been paid nor during the course of arguments any offer for settlement of payment of the amount has been made, as per version of the learned Senior Counsel for the respondent - Bank, at present, the dues is around ninety crores.
25. For these reasons, Writ Petition No.12021/2018 filed by the petitioners under Article 227 22 WP No.12021/2018 of the Article has no merit and is accordingly, dismissed without any order as to costs.
(P.K. Jaiswal) (S.K. Awasthi)
Judge Judge
Pithawe RC
Digitally signed by Ramesh
Chandra Pithwe
Date: 2018.07.06 11:38:05
+05'30'