IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.06.2011 CORAM THE HONOURABLE MR. JUSTICE D.MURUGESAN AND THE HONOURABLE MR. JUSTICE K.K.SASIDHARAN W.P.No.6175 of 2011 and M.P.No.1 of 2011 1.M/s.Indi Shopee Private Limited, rep. by its Director Mr.A.Senthilnathan. 2.Tara Keerthi Kakumanu 3.Mr.Sarat Kakumanu 4.Mrs.Sheela K.Sarath 5.M/s.Kakumanu Consultants (P) Ltd. 6.M/s.Pioneer Building Syndicate (P) Ltd., 7.M/s.Pioneer Concrete Block (P) Ltd. 8.Perungudi Developers (P) Ltd. ... Petitioners Vs. 1.The Authorized Officer, Union Bank of India, Nungambakkam Branch, No.37, College Road, Nungambakkam, Chennai-6. 2.The Branch Manager, Union Bank of India, Nungambakkam Branch, No.37, College Road, Nungambakkam, Chennai-6. ... Respondents Writ petition has been filed under Article 226 of the Constitution of India for the issuance of writ of certiorarified mandamus to call for the records and to quash the sale notice issued by the first respondent bearing No.NGM: NPA 504 dated 5.2.2011 and the subsequent communication dated 7.2.2011 bearing No.NGM: GEN: 556 persistent to the paper publication of Section 13 (4) notice under SARFAESI Act dated 11.12.2010 and also further direct the first respondent not to proceed any further against these petitioners and https://hcservices.ecourts.gov.in/hcservices/ any provision of the SARFAESI Act without following the due process of law and the petitioners are challenging in these writ petitions only the sale notice as illegal, improper and violative of the principles of natural justice and totally arbitrary. For petitioners : Mr.G.R.Lakshmanan For respondents : Mr.Srinath Sridevan O R D E R (Order of the Court was made by D.MURUGESAN,J) This writ petition raises an important question as to whether as per sub rule (6) of Rule 8 of the Security Interest (Enforcement) Rules, a public notice for holding public auction to sell the secured movable assets giving 30 days time could be extended. 2. The petitioners are the borrowers of certain loan facilities from the respondent Union Bank of India, Nungambakkam Branch, Chennai. As the petitioners are the defaulters, the debt was declared as non-performance assets and thereafter, the respondent bank issued notice under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (herein after referred to as SARFAESI Act) giving 60 days time to the petitioners to honour the demand made in that notice. As the petitioners did not meet the demand, the respondent bank issued possession notice dated 11.12.2010 under Section 13 (4) of the SARFAESI Act. Thereafter, a notice dated 5.2.2011 under Rule 8 (6) of the Security Interest (Enforcement) Rules was served on the petitioners indicating that the properties would be brought for sale on 10.3.2011. It appears that though the sale was scheduled to be held on 10.3.2011, it was unilaterally rescheduled to 14.3.2011 by subsequent communication dated 7.2.2011. This communication dated 7.2.2011 has been served on the petitioners. Questioning not only the communications dated 5.2.2011 and 7.2.2011, but also the possession notice dated 11.12.2010, the petitioners have approached this Court by way of the present writ petition. 3. Mr.G.R.Lakshmanan, learned counsel appearing for the petitioners would contend that in terms of sub rule (6) of Rule 8 of the Security Interest (Enforcement) Rules, 2002, the notice dated 5.2.2011 fixing the sale on 10.3.2011 was not notified and on the other hand, the respondent bank had intimated even when such notice published in the newspapers rescheduling the date of sale from 10.3.2011 to 14.3.2011. The above act of the respondent bank is in clear violation of Rule 8(6) of the Security Interest (Enforcement) https://hcservices.ecourts.gov.in/hcservices/ Rules and in that sense, the sale notice dated 5.2.2011 and the subsequent communication dated 7.2.2011 are liable to be set aside. He would further submit that on merits, the notice under Section 13 (4) of the SARFAESI Act is also illegal. 4. Mr.Srinath Sridevan, learned counsel appearing for the respondent bank would contend that the petitioners have not brought to the notice of this Court the public notice dated 8.2.2011 issued in the English Daily "The New Indian Express" as well as in the Tamil Daily "Dinamani" on 10.2.2011 in terms of the proviso to sub rule (6) of Rule 8 of the Security Interest (Enforcement) Rules. Learned counsel would further submit that the earlier communication dated 5.2.2011 and the subsequent notice dated 8.2.2011 are in accordance with the proviso to sub rule (6) of Rule 8 of the Security Interest (Enforcement) Rules. The respondent bank has complied with the requirements as per the rules and the petitioners suppressing the publication dated 10.2.2011, have obtained interim order of stay and therefore, no auction could be conducted and for that reason a sum of Rs.1,05,635/- has been incurred for publication. The above amount should be imposed by way of cost on the petitioners in view of the suppression of the publication. 5. We have carefully considered the above submissions. The writ petition revolves as to the interpretation of sub rule (6) of Rule 8 of the Security Interest (Enforcement) Rules. For that reason, the sub rule (6) of Rule 8 is extracted here under:- " 8. Sale of immovable secured assets:- (1) ... (2) ... (3) ... (4) ... (5) ... (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): 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 https://hcservices.ecourts.gov.in/hcservices/ 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; (e) depositing earnest money as may be stipulated by the secured creditor; (f) any other thing which the authorized officer considers it material for a purchaser to know in order to judge the nature and value of the property." 6. As per sub rule (5), the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the price of the property and thereafter, the authorized officer may sell the 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. For the purpose of this submission, sub rule (6) of Rule 8 is relevant which we have extracted above. A careful reading of that rule shows that in terms in sub rule (6) of Rule 8, it is mandatory on the part of the authorized officer to serve to the borrower a notice of thirty days for sale of the immovable secured assets in sub-rule (5). In this case, the authorized officer has decided to sell the property by inviting tenders from the bidders. In the counter affidavit, it is stated that the valuation of the property was obtained by the authorized officer from an approved valuer in consultation with the secured creditor. In conformity with the said rule, by notice dated 5.2.2011, the petitioners were informed that the secured assets would be brought for sale on 10.3.2011. The said notice reads as follows:- Sir/Madam, Where as the bank acting through its Authorized Officer, in exercise of its powers under Section 13 (4) of Securitisation Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) has https://hcservices.ecourts.gov.in/hcservices/ decided to put up for sale the properties described in schedule-1, part-A for realization of debts due to the Bank from M/s.Indi Shopee, as mentioned in part B of schedule-1 enclosed herewith. 2. Notice is hereby given under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, that sale of properties described in Schedule-1 Part-A shall be held by the Authorized Officer as per the details set out here under:- Date of Sale 10.03.2011 Time of Sale 11. AM onwards Place of Sale UNION BANK OF INDIA, 37, COLLEGE ROAD, NUNGAMBAKKAM, CHENNAI-6. Reserve Price fixed in FOR LOT NO.1 Rs.16.00 crores rupees (consisting of fifteen title deeds) FOR LOT NO.2 Rs.7.42 crores (consisting of one title deed) 3. Take notice that in the event of schedule-1, part B debts and the costs of sale being tendered by you on or before the date of sale, then Authorized Officer would stop the sale. No communication or offers would be entertained from you once the sale is complete. 4. Take further notice, that in the event the sale proceeds of the schedule-1 part A property is not sufficient to satisfy the schedule-1 part-B debts, then bank would take recourse to the remedies available under law for recovery of balance amount." The above notice, in our opinion, is in conformity with sub rule (6) of Rule 8 of the Security Interest (Enforcement) Rules. 7. Apart from the above communication, notice of thirty days for sale of immovable secured assets was communicated to the borrowers. In the event the sale of secured assets 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. The said proviso empowers the authorized officer to independently issue a sale notice published in the newspapers apart from a notice as required under sub rule (6) of rule 8. In terms of proviso to sub rule (6) of Rule 8, the authorized officer has issued the sale notice dated 8.2.2011 and https://hcservices.ecourts.gov.in/hcservices/ published in the English Daily "The New Indian Express" and Tamil Daily "Dinamani" dated 10.2.2011. This notice dated 8.2.2011 is in conformity with the proviso to sub rule (6) of rule 8 which has not been even disclosed in the affidavit filed in support of the writ petition. The contention of the petitioners that the notice dated 5.2.2011 ought to have been published and in the absence of any such publication, the respondent bank cannot extend the time by subsequent notice dated 7.2.2011, in our opinion, is on total misconception of the rule. In terms of sub rule (6) of rule 8, the petitioners were informed by notice dated 5.2.2011. When a notification was published in the newspapers fixing a date on 14.3.2011, the authorized officer has again intimated the petitioners by subsequent notice dated 7.2.2011, stating that the sale would be held on 14.3.2011, which was in conformity with the sale notice dated 8.2.2011. This intimation is only in respect of the publication of notification and the same cannot be considered to be a mere extension of time of the date of sale. As the requirement under sub rule (6) of rule 8 and the proviso to sub rule (6) of rule 8 are at two different situations, one in respect of intimation to the borrower by way of notice of thirty days and another for inviting tenders from the public for purchase of the property by giving thirty days notice in public auction, in that view of the matter, the challenge to the notice dated 5.2.2011 fixing the sale on 10.3.2011 and the subsequent notice dated 7.2.2011 intimating the petitioners of the date of sale as 14.3.2011 cannot be considered to be in contravention of sub rule (6) of rule 8. Hence, the challenge to the above two notices is unsustainable. For that reason, the writ petition is liable to be rejected. 8. As far as the challenge to the notice of possession under Section 13 (4) of the SARFAESI Act, the Hon'ble Apex Court, in the decision reported in (2010) 8 Supreme Court Cases 110 – United Bank of India vs. Satyawati Tondon and others, has held that this Court cannot entertain a writ petition questioning the possession notice under Section 13 (4) of the SARFAESI Act as the petitioners have got an effective alternative remedy of filing an appeal under Section 17 (1) of the SARFAESI Act. Hence, the challenge to the possession notice cannot also be entertained. 9. For all the above reasons, the writ petition is dismissed as devoid of merits. Consequently, connected miscellaneous petition is closed. 10. Coming to the last submission made by Mr.Srinath Sridevan, learned counsel appearing for the respondent bank for imposition of costs, it is true that the petitioners have not disclosed the notice dated 8.2.2011 published in two dailies on 10.2.2011 and they have approached this Court solely on the ground that earlier notice dated 5.2.2011 fixing the time and date of sale as 10.3.2011 was extended unilaterally in contravention of rule 8 (6) of https://hcservices.ecourts.gov.in/hcservices/ the Security Interest (Enforcement) Rules. However, in our opinion, the writ petition has been filed only on misunderstanding of the above rules. That apart, in any event, whatever the expenses incurred by the bank is only to be borne out by the petitioners as the bank could recover the same along with the dues and for that reason, except observing that the non-discloser cannot be appreciated, we are not inclined to impose any cost. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar sbi To 1.The Authorized Officer, Union Bank of India, Nungambakkam Branch, No.37, College Road, Nungambakkam, Chennai-6. 2.The Branch Manager, Union Bank of India, Nungambakkam Branch, No.37, College Road, Nungambakkam, Chennai-6. +1cc to Mr.G.R.Lakshmanan, Advocate Sr 34401 KJ(CO) km/28.6. W.P.No.6175 of 2011 https://hcservices.ecourts.gov.in/hcservices/