IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.12.2011 CORAM: THE HONOURABLE MR. JUSTICE D. MURUGESAN AND THE HONOURABLE MR.JUSTICE N. KIRUBAKARAN W.P.No.28528 of 2011 & M.P.No.1 of 2011 Authorised Officer State Bank of India 7, Kutchery Road Udumalpet Coimbatore District. ..Petitioner -Vs.- 1. R. Krishnasamy 2. K. Suresh 3. K. Nagaveni 4. Saraswathi 5. G. Kalayanasundaram 6. Senthilkumar 7. Debts Recovery Appellate Tribunal Egmore, Chennai. ..Respondents Prayer:- Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari calling for the records in RA(SA) No.157/2010 on the file of the seventh respondent namely DRAT, Chennai and quash the order dated 17.11.2011 as illegal, arbitrary and discriminatory, contrary to law. For Petitioner : Mr.K. Sankaran https://hcservices.ecourts.gov.in/hcservices/ O R D E R (Order of the Court was made by D. MURUGESAN, J) This writ petition at the instance of the State Bank of India, Udumalpet Branch, questions the order of the Debts Recovery Appellate Tribunal dated 17.11.2011, wherein and whereby, the Debts Recovery Appellate Tribunal set aside the sale of immovable properties, conducted by the petitioner - Bank on 3.7.2007. 2. The facts leading to the present writ petition are as follows:- The first respondent - the proprietor of M/s. Vijayadeep & Giri Cloth Stores, Udumalpet availed cash credit facilities from the petitioner- Bank and deposited the title deeds relating to his immovable properties for creation of mortgage. As there was default in re-payment of the debts, the Bank classified the debts of respondents 1 to 5 as "Non Performing Asset" on 30.10.2003. The petitioner-Bank also filed O.A.No.333 of 2004 before the Debts Recovery Tribunal and a recovery certificate was also issued for a sum of Rs.20,28,005/-. 3. Pursuant to the recovery certificate, the petitioner - Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (herienafter referred to as "SARFAESI Act") dated 18.2.2007 calling upon respondents 1 to 5 to discharge the entire liability amounting to Rs.20,85,890.75 within a period of sixty days from the date of receipt of the notice. As respondents 1 to 5 failed to honour the said notice, the petitioner - Bank issued possession notice dated 19.4.2007 and took symbolic possession. Thereafter, sale notice dated 2.6.2007 was issued. Admittedly, the same was served on the first respondent only on 5.6.2007. The date of sale was fixed as 3.7.2007, on which date, the sale was held and the offer of the sixth respondent was accepted and later the sale was confirmed in his favour. 4. The first respondent filed W.P.No.24042 of 2007 before this Court challenging the sale notice dated 2.6.2007 and the consequential auction conducted by the petitioner-Bank on 3.7.2007. This Court by order dated 19.7.2007 dismissed the writ petition on the ground of alternative remedy. Nevertheless, this Court in paragraph 4 of the said order has directed as follows: "However, in order to protect the interest of the petitioner at this stage, as the petitioner has to move the Debts Recovery Tribunal within a prescribed time limit, the petitioner is granted two weeks time from 6.8.2007 to move the Debts Recovery Tribunal, Coimbatore to adjudicate the issues in question. Till such time, the impugned https://hcservices.ecourts.gov.in/hcservices/ proceedings shall be kept in abeyance." 5. Pursuant to the above direction, the first respondent preferred O.A.(S) No.83 of 2007 challenging the auction sale held on 3.7.2007, which application was dismissed by the Debts Recovery Tribunal, Coimbatore on 15.2.2008. The said order was questioned by the first respondent by preferring R.A.(SA) No.157 of 2010 before the Debts Recovery Appellate Tribunal. The said appeal was allowed on the ground that the provisions of Rules 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002 has been violated. This order is put in issue in this writ petition. 6. We have heard the learned counsel appearing for the petitioner- Bank. 7. According to the learned counsel for the petitioner, the first respondent is estopped from raising the question that the sale has been held before the period of thirty days from the date of service of sale notice on him, as he has not chosen to raise the same, when he had filed the earlier writ petition in W.P.No.24042 of 2007 before this Court. That apart, the first respondent was not prejudiced due to the conduct of the Bank in selling the property even before the expiry of thirty days and in such event, the sale cannot be set aside. On the above submissions, the learned counsel seeks indulgence of this Court to set aside the order of the Debts Recovery Appellate Tribunal. In support of his contention, the learned counsel relied on the judgment of the Supreme Court reported in 1991 Suppl. (2) SCC 691 (Jaswantlal Natvarlal Thakkar v. Sushilaben Manilal Dangarwala) and the judgment of the Privy Council reported in Vol XII Madras Series 19 (Arunachellam v. Arunachellam and another). 8. We have carefully considered the above submissions and we are not inclined to accept the same for our following reasons. The provisions of the SARFAESI Act is intended to recover the debts advanced by the Banks and financial institutions from the borrower by proceeding against the secured assets of both the borrowers and the guarantors. A set of procedures had been incorporated under the provisions and the Rules made thereunder, not only for recovery of the debts, but also the manner in which the recovery of the secured assets should be brought for sale. 9. The SARFAESI Act is specially enacted to regulate the recovery of debts from the borrowers without recourse to the usual procedures of initiating suits before the Civil Court, as such procedures cause undue delay and hardship. Nevertheless, Courts have repeatedly held that since recovery laws are very stringent in nature and the powers having been given to the Banks and financial institutions to take such measures under the provisions of the said Act and the Rules thereunder, equally the Banks and Financial Institutions are bound to https://hcservices.ecourts.gov.in/hcservices/ follow each and every provisions strictly without any deviation. Any slight deviation in the provisions of the said Act/Rules which results in serious hardship to the borrower/guarantor, would invalidate the action of the Bank as bad. 10. Keeping the above law in mind, we now refer to the provisions of the SARFAESI Act. Though the provisions of the SARFAESI Act contemplate stringent provisions, certain safeguards are also made in favour of the borrowers and guarantors, by way of opportunity to make re-payment. The foremost condition to be followed by the Banks/financial institutions before invoking the provisions of the Act, is to declare the debts of the borrower as "Non Performing Asset". Thereafter, notice under Section 13(2) has to be issued calling upon the borrower to settle the amount in a period of sixty days. On receipt of such notice, the borrower is entitled to make a representation or raise any objection for the notice of demand as per Section 13(3-A). If any such representation or objection is made, the same shall be considered by the Banks/financial institutions and if such representation or objection is not acceptable or tenable, the reasons for non-acceptance must be communicated to the borrower within one week of receipt of such representation. Though the right of the borrower to make a representation or raise objection is contemplated under the provisions of Section 13(3-A) of the Act, he has no right to challenge the order of rejection if any, in view of the proviso to the said Section. One more opportunity to the borrower is that, in the event the borrower fails to discharge his liability in full within the period specified in sub-section (2) of Section 13 of the Act, the secured creditor may take any measures as provided under Section 13(4). However, in terms of Section 13(5), in case, if any payment is made by any person pursuant to the notice issued by the secured creditor to such person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower in terms of Section 13(4)(d), such payment shall be taken into account and a valid discharge should be made as if he has made the payment to the borrower. In the event the payment is not made as per the demand under Section 13(2) or a valid discharge is not given in terms of Section 13(5) of the Act, the Banks/financial institutions may bring the property for sale. However, in terms of Section 13(8), if the dues of the secured creditor, together with all costs, charges and expenses incurred by him, are tendered at any time before the date fixed for sale, the assets cannot be sold and no further steps would be taken by the secured creditor for transfer or sale of the secured assets. These are all some of the safeguards available to the borrower before the property is brought for sale. 11. Likewise, there are provisions which are to be strictly complied with by the Banks/financial institutions for sale. In this https://hcservices.ecourts.gov.in/hcservices/ context, we may refer to Rule 8(1) of the Security Interest (Enforcement) Rules, 2002, which contemplates that where a secured asset is an immovable property, the authorised officer shall take or cause to be taken possession by delivering a possession notice prepared as nearly as possible in Appendix IV to the said Rules to the borrower or by affixing the possession notice on the outer door or at such conspicuous place of the property. Sub-Rule (5) of Rule 8 of the said Rules provides that before effecting sale of the immovable property, the Bank or the financial institution should adopt any one of the following methods: (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying such assets; or (b) by inviting tenders from the public; (c) by holding public auction; or (d) by private treaty. 12. Thereafter, in the event the possession is taken, the authorised officer, in terms of Sub Rule (6) of Rule 8, shall serve on the borrower, a notice of thirty days for sale of immovable secured assets under sub-Rule (5) of Rule 8. 13. Rule 9(1) of the said Rules contemplates that no sale of immovable property under the Rules, shall take place before the expiry of thirty days from the date on which public notice of sale is published in the newspapers as referred to in the proviso to sub-rule (6) of Rule 8 or notice of sale has been served on the borrower. If Rule 9(1) is read together with sub-rule (6) of Rule 8, the period of thirty days should be calculated from the date of service of sale notice on the borrower and not the date of publication in the newspaper. Therefore, the borrower has got an opportunity to save the property by exercising the right of redemption for repaying the amount within a period of sixty days from the date of receipt of the notice under Section 13(2) or under Section 13(4) of the SARFAESI Act or within a period of thirty days from the date of receipt of sale notice. Such a valuable opportunity available to the borrower shall not be taken away by the Bank or financial institution solely on the ground that the borrower has not raised the point at the earliest point of time. 14. The contention of the learned counsel for the petitioner-Bank that the first respondent-borrower having failed to take the above ground at the earliest point of time when he filed a writ petition, cannot be allowed to take the said ground at a later point of time. In our opinion, the said contention cannot be accepted for the simple reason that the first respondent-borrower while questioning the sale notice dated 2.6.2007 and the consequential auction conducted by the petitioner-Bank on 3.7.2007 before this Court on the earlier occasion, though not raised the said ground, this Court while dismissing the writ petition gave liberty to the first respondent- https://hcservices.ecourts.gov.in/hcservices/ borrower to work out his remedy by taking appropriate application before the Debts Recovery Tribunal. In pursuance of the said direction, the application was filed and in paragraphs 7 and 8 of the application, the first respondent has raised the following contentions before the Debts Recovery Tribunal: "7. The applicant respectfully submits that the despite the fact that on 30.6.2007, he paid a sum of Rs.10,00,000/- (Rupees Ten lacs) after publication of sale notice on 2.6.2007, the first respondent auctioned his property on 3.7.2007 for a meagre sum of Rs.41,00,000 (Rupees fortyone lacs) out of the reserved price unanimously fixed as Rs.40,70,000/- (Rupees forty lakhs seventy thousand only) to the sixth respondent. 8. The applicant respectfully submits that the actions/proceedings taken by the first respondent bank is arbitrary, unlawful and against the principles of natural justice. In fact, the present market values of the properties sold out in the auction sale is worth more than two crores of rupees. The first respondent bank with hand in glove with the sixth respondent has sold out the property just more than Rs.30,000/- above the reserved price fixed by the first respondent which fact would reveal its collusion with the sixth respondent. Further the sixth respondent has not paid the auctioned sale consideration to the first respondent. The first respondent has taken the law into their hand and has acted arbitrarily, unilaterally." 15. As far as the contention regarding estoppel, when an invaluable right of the borrower for redemption is taken away by virtue of the sale which was held in contravention of the provisions of Rules 8(6) and 9(1) of the said Rules, the question of estoppel cannot be allowed to be raised and for that reason, the submission of the learned counsel appearing for the petitioner-Bank is rejected. 16. As far as the question of prejudice is concerned, according to the first respondent-borrower, the property is worth more than Rs.2 crores. With that averment, he had approached the Debts Recovery Tribunal by making a grievance that the reserve price was fixed unanimously at Rs.40,70,000/- and the property has been sold for a sum of Rs.41,30,000/- over and above the reserve price. In terms of the order of this Court, the first respondent has raised the question of prejudice for the first time when he prepared the application before the Debts Recovery Tribunal. In that view of the matter, the contention of the learned counsel for the petitioner that the first respondent was not prejudiced by the sale, is unacceptable. https://hcservices.ecourts.gov.in/hcservices/ 17. The judgment of the Supreme Court reported in 1991 Suppl. (2) SCC 691 (Jaswantlal Natvarlal Thakkar v. Sushilaben Manilal Dangarwala) arose under Order 21 Rule 72 CPC, where there was no opportunity for the judgment debtor to repay the amount in a definite period as is available to the borrower in terms of sub Rule 9(1) of the Security Interest (Enforcement) Rules, 2002. The judgment of the Privy Council reported in Vol XII Madras Series 19 (Arunachellam v. Arunachellam and another) relied upon by the petitioner-Bank is also on execution proceedings relating to attachment and sale of immovable property. In view of the specific provisions of the Security Interest (Enforcement) Rules, both the judgments cannot be accepted on the facts of this case. 18. There is no dispute that the sale notice was served on the first respondent only on 5.6.2007 and the sale was conducted on 3.7.2007 even before the stipulated period of thirty days, which is in contravention of Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 and for that reason, the sale is liable to be set aside, as has been rightly set aside by the Debts Recovery Appellate Tribunal. Therefore, we do not find any reason to interfere with the impugned order passed by the Debts Recovery Appellate Tribunal and the writ petition is dismissed. Consequently, the connected MP is closed. No costs Sd/- Asst. Registrar /true copy/ Sub Asst. Registrar. Tr/ To Debts Recovery Appellate Tribunal Egmore, Chennai. 1 cc To Mr.M.Venkadeshan, Advocate Sr 76237 1 cc To Mr.K.Sankaran, Advocate Sr 75822 W.P.No.28528 of 2011 JSV[co] gp/18.1 https://hcservices.ecourts.gov.in/hcservices/