IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON MONDAY, THE 22ND JUNE 2009 / 1ST ASHADHA 1931 WP(C).No. 20884 of 2008(J) -------------------------------------- PETITIONER: ------------------- V.G.PAPPACHAN, AGED 65 YEARS, S/O GEEVARGHESE, BLAHETHE HOUSE, ELIKKETTOOR, PATHANAPURAM TALUK, KOLLAM DISTRICT. BY ADVS. MR.T.A.UNNIKRISHNAN, MR.P.P.BIJU. RESPONDENTS: ------------------------ 1. THE SOUTH INDIAN BANK LTD., REGIONAL OFFICE, HOTEL STAFF, INTERNATIONAL BUILDING, THIRUVANANTHAPURAM, REPRESENTED BY ITS AUTHORISED OFFICER, 2. K.J. MATHEW, KUNNATHOOR HOUSE, PYMANATHOOR, PIRAVANTHOOR POST, KOLLAM DISTRICT. R1 BY ADV. MR.GEORGE VARGHESE (MANACHIRACKEL), R2 BY ADV. MR.SUBHASH CYRIAC. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22/06/2009,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C). NO.20884/2008-J: APPENDIX PETITIONERS' EXHIBIT: EXT.P.1: COPY OF THE NOTICE ISSUED BY THE R.1. TO THE PETITIONER DTD. 11/02/2008. RESPONDENTS' EXHIBITS: EXT.R1.A: COPY OF THE AUCTION PROCEEDINGS RECORDED IN THE SARFAESI AUCTION REGISTER. EXT.R1.B: COPIES OF MATHRUBHOOMI AND INDIAN EXPRESS DAILIES DTD. 08/04/2008 PUBLISHING AUCTION SALE FIXED ON 28/05/2008. //TRUE COPY// P.A. TO JUDGE. Prv. P.R. RAMACHANDRA MENON, J. ----------------------------------------------- WP(C) No.20884/2008 ------------------------------------- DATED THIS THE 22th DAY OF JUNE 2009 JUDGMENT The Petitioner had availed a loan from the 1st respondent bank on the strength of equitable mortgage created over the property having an extent of 3.3 cents of land. The case of the petitioner is that, because of uforseen events, the business of the petitioner collapsed, whereupon he had to close down the business and the liability towards respondent bank could not be satisfied as intended. It is also the case of the petitioner that he owes money to several persons as well. 2. Met with the circumstances, the 1st respondent bank resorted to the steps under the SARFAESI Act and issued notice under Section 13(2) of the Act which was followed by subsequent proceedings taking possession of the property and building and finally putting it to sale in public auction. WP(C) No.20884/2008 2 Since there was no much response from the prospective bidders, the sale could not take place, which in turn was adjourned to different dates. Later, in the public auction conducted on 27-6-2008, the 2nd respondent turned to be the successful bidder and the sale was confirmed in favour of him, which made the petitioner to approach this Court by filing the above Writ Petition challenging the proceedings taken by the respondent bank. 3. The respondent bank has filed a counter affidavit rebutting the averments and allegations raised by the petitioner. It is asserted in the counter affidavit that the sale was conducted by the respondent bank in corfirmity with the relevent provisions of law and that the averments and allegations to the contrary are quite wrong and misconceived. Copies of the relevent testimonials including the paper publication stated as effected by the respondent bank in respect of the sale scheduled to be conducted on 11-4-2008 WP(C) No.20884/2008 3 and 28-5-2008 have also been produced as Exhibit R1 (b) series. The learned Counsel for the petitioner submits that the sale conducted by the respondent bank cannot be held as correct and sustainable, particularly in view of the fact that there was clear violation of the statutory prescriptions in this regard. The learned Counsel, with reference to Rule 8(5) of the Security Interest (Enforcement) Rules 2002, submits that no paper publication was effected by the respondent bank in connection with the sale conducted on 27-6-2008. The said rule is extracted below for convenience and reference ; R. 8 (5) : Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the WP(C) No.20884/2008 4 whole or any part of such immovable secured asset by any of the following methods:- (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or (b) by inviting tenders from the public; (c) by holding public auction; or (d) by private treaty. 4. It is also relevent to note that Sub rule 6 of R.8 stipulates the contents of the sale notice Sub.Rule 7 of R.8 also throws some light as to the manner of service of notice and as to the method of sale. Sub Rules 6 and 7 as aforesaid are also extracted here for the purpose of convenience of reference; R.8(6): The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): WP(C) No.20884/2008 5 Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,- (a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; (c) reserve price, below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; WP(C) No.20884/2008 6 (e) depositing earnest money as may be stipulated by the secured creditor; (f) any other things which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property. R.8(7): Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorised officer deems if fit, put on the web-site of the secured creditor on the Internet. 5. From the above, it is very much discernable that the mode of sale, if by public auction, as contemplated under Rule 8(5)(c), it is very much necessary that the secured creditor shall cause a public notice in two leading newspapers, one in vernacular language having sufficient circulation in the locality by setting out the terms of sale as WP(C) No.20884/2008 7 stipulated in the proviso to Sub rule 6 of Rule 8. Such publication has necessarily to include all the particulars as given under Sub clause (a) to (f) under the proviso of Sub rule 6. Sub clause (d) of Sub rule 6 clearly stipulates the time and place of public auction to be included as part of the above notice to be published in the two leading newspapers as aforesaid. Obviously, Sub rule 8 of R.8 is an exception to the above general rule which says that, if the sale is by any method other than the public auction or public tender, it could be on such terms as may be settled between the parties in writing. This means, in the case of a sale by public auction/public tender, the mandatory requirements as to the public auction to be effected in two leading newspapers; one of which must be in the vernacular language, is very much to be satisfied for holding the sale as a valid and proper. 6. The sequence of events described by the 1st respondent in para.7 of their counter affadavit shows that the paper WP(C) No.20884/2008 8 publication was effected in the 'Indian Express' and 'Malayala Manorama' dailies, only in respect of the sale as originally notified to be held on 11-4-2008 and 28-5-2008, to which date it was adjourned, for want of bidders. It has been categorically stated by the 1st respondent that, as the sale could not take place on 28-5-2008 as well, it was adjourned to 27-6-2008 at 12.30 pm and thereafter at 3 pm on the same date. It is further stated that there were 3 participants in the auction at 12.30 pm, whereas there appeared to be 6 participants at about 3 pm. The bid was admittedly finalised in favour of the 2nd respondent. But the question whether the 2nd respondent was one among the 3 participants who appeared for the bid at 12.30 pm on 27-6-2008, can't be discerned since no material is available to arrive at such inference. In any view of the matter, it remains to be an undisputed fact that no newspaper publication was effected by the 1st respondent bank in respect of the public auction WP(C) No.20884/2008 9 held on 27-6-2008 and that the property was sold to the 2nd respondent without any paper publication. 7. From the above, it is very much clear that the auction conducted by the respondent bank is not in confirmity with the statutory requirements. When the statute stipulates the performance of an Act in a particular manner, it is settled that the performance can be held as valid only if performed in that particular manner and in no other manner at all. This being the position, the sale held on 27-6-2008 declaring the 2nd respondent as the successful bidder in respect of the property in question is not in tune with the specific mandate under Rule 8(5) of the rules and hence it is set aside. The respondent Bank is permitted to proceed with further fresh steps in accordance with law, for realization of the due amount. It is also made clear that the judgment will not preclude the rights and interest of the petitioner from clearing the entire liability due to the bank and to save the WP(C) No.20884/2008 10 building and property from such coercive steps. It is also made clear that it will be for the 2nd respondent to approach the 1st respondent for returning the amount already deposited by him in connection with the sale proceedings as above. The Writ Petition is allowed to the above extent. No cost. P.R. RAMACHANDRA MENON JUDGE pkk