R.A(S.A):131/2011
1. This appeal impugns the order dated 31.5.2011 passed by the Learned Presiding Officer, DRT Coimbatore in SA No.34/2010.
2. The case of the appellant may be stated as follows:
The appellant is the Sole Proprietor of M/s Kailasam and Chitravathi Farm and the said farm is a reputed one in the area. The appellant had planted flower plants, fruit trees like Amla, Mango, Sapota, Rose etc., in the said lands at Kermalam, Kudhiyalathur, Kadampur Post, Sathyamangalam Taluk, Erode District. The appellant had approached the first respondent bank for credit facilities and the first respondent bank sanctioned an Agricultural Term Loan of Rs.69,40,000/- on 20.9.2004 and the said sum was released in stages. The loan was repayable within a period of ten years (including the initial holiday period of three years) in two yearly installments of Rs.4.70 lakhs each and 5 years installments of Rs.12 lakhs each. The appellant had deposited the title deeds of the immovable properties viz., agricultural land in S.F. No.2428/1. 2428/5, 2429/2, 2430/1 etc., at Kermalam, Kudhiyalathur, Kadampur Post, Sathiyamangalam Taluk, Erode District and the house property at Old No.119, 120 and New No.117 and 118, Agrahara Street, Perundurai, Erode to secure the loan. At the request of the appellant the first respondent bank sanctioned a further sum of Rs.33.39 lakhs on 10.5.2005 for the construction of a Green House, drip irrigation and for cultivation of capsicum. The said sum was to be repaid in six years (including the initial holiday period of one year) with interest @11.75% p.a. While so when the farm was coming up well wild elephants damaged the entire crops on several occasions and because of this the appellant faced losses and could not repay the loans as agreed to. The appellant sent a representation to the first respondent bank requesting for the deferment of the payment of loan for sometime and also paid a sum of Rs.19 lakhs to show his bonafides. In the meantime the Government of India issued guidelines for debt waiver and debt relief scheme for the farmers and as per the said scheme the appellant was entitled to get an One Time Settlement in which he would have got a rebate of 25% subject to the condition of payment of the balance 75% of the eligible amount. The scheme required that the first respondent to display on or before 30.6.2008 the list of persons who could avail the benefit. The first respondent failed to display the list and therefore the appellant could not submit his proposal. While so the first respondent bank issued the demand notice under Section 13(2) of the SARFAESI Act on 28.10.2008 and took symbolic possession of the house property on 25.3.2009 and issued the sale notice on 22.5.2009 fixing the auction sale on 25.6.2009. The appellant therefore filed SA No.65/2009 on the file of DRT Coimbatore wherein the Ld. Presiding Officer passed a conditional order. Aggrieved by the said order the appellant filed W.P. No.11229/2009 before the Hon’ble High Court and the said writ petition was dismissed with a direction to the Tribunal below to dispose of the SA before end of August 2009 and the Tribunal below dismissed the said SA. Subsequently the first respondent bank issued a fresh sale notice on 22.1.2010 fixing the auction sale on 25.2.2010. The appellant paid a sum of Rs.2.5 lakhs on 24.2.2010 into the loan account and the Branch Manager agreed to defer the auction on the condition that the entire dues are paid within two months. The Authorized Officer therefore postponed the sale but did not communicate the next date of auction to the appellant as per the Act. The Authorized Officer conducted the sale on 5.3.2010 and the sale certificate was issued on 30.3.2010 without the confirmation of the sale. Aggrieved by the proceedings of the Authorized Officer the appellant filed SA No.34/2010 on the file of DRT Coimbatore and the same was dismissed by the Ld. Presiding Officer by his order dated 31.5.2011. Hence this appeal.
3. Ld. Counsel appearing on behalf of the appellant drew the attention of this Tribunal to the requirement under Rule 8(6) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 and stated that in this case the requirement under Rule 9(1) has not been followed by the Authorized Officer and that this contravention alone apart from the other contraventions entitles the appellant to have his appeal allowed. Ld. Counsel further stated that in the absence of any confirmation the entire proceedings would come to a nullity as the Authorized Officer cannot issue a sale certificate in the absence of a confirmation. Ld. Counsel further stated that the Authorized Officer could not have sold the property without inviting the public to participate in the auction which is mandatory under Rule 9(1) of the Security Interest (Enforcement) Rules, 2002. The Ld. Counsel relied upon the judgment of the Hon’ble High Court of Punjab and Haryana in the case of “Bharat Industrial Corporation Vs. Punjab Financial Corporation and Ors” II (1998) BC 546(DB) in support of his contentions.
4. The Ld. Counsel for the first respondent bank stated that the Authorized Officer has not contravened any of the provisions of the SARFAESI Act or the Rules made thereunder. The Ld. Counsel drew the attention of this tribunal specifically to paragraph 11 of the order of the Ld. Presiding Officer and stated that whatever that is found therein has been properly arrived at by the Ld. Presiding Officer and that the bank was never at fault in taking up the proceedings under the provisions of the SARFAESI Act and the Rules made thereunder. The Ld. Counsel relied upon a letter dated 11.5.2007 said to have been given by the borrower to the bank in this case and stated that a reading of the same would reveal that the borrower has admitted the liability and that having admitted the liability the borrower cannot now come forward to challenge the action of the Authorized Officer. The Ld. Counsel prayed for a dismissal of the appeal.
5. The first respondent bank filed its written submissions and the same form part of the record.
6. Ld. Counsel appearing on behalf of the Auction Purchaser stated that the auction purchaser has invested more than Rs. 70 lakhs and that he has purchased the property in the month of March 2010 and that he is still not able to enjoy the property after investing his hard earned money. Ld. Counsel stated that the sale certificate has been issued by the Authorized Officer and that no confirmation letter has been given to the Auction Purchaser so far.
7. Heard the Ld. Counsel for the appellant, Ld. Counsel for the respondent bank and the Ld. Counsel for the auction purchaser.
8. It is seen that the Authorized Officer in this case had issued the sale notice on 22.1.2010 and the sale was scheduled to take place on 25.2.2010. It is seen that necessary paper publications have been taken out for the sale and thereafter the sale that was proposed to be held on 25.2.2010 did not take place and the Authorized Officer postponed the sale to 5.3.2010 by displaying a separate notice in the respondent bank’s notice board on the very same day i.e., 25.2.2010. The case of the respondent bank is that the display of separate notice was enough for postponing the sale and the sale was conducted successfully on 5.3.2010.
9. Now the questions that arise for consideration in this case may be stated as follows:
(i) Whether the Authorized Officer is bound to confirm the sale on receipt of 25% of the bid amount in favour of the successful bidder?
(ii) Whether the Authorized Officer can receive the balance 75% of the sale price without the issuance of the letter of confirmation?
(iii) Whether in this case the letter of confirmation has been issued by the Authorized Officer?
(iv) Whether the sale certificate can be issued in the absence of the confirmation of sale and if the sale certificate is issued without the confirmation, whether the sale certificate would be valid in the eyes of law?
(v) whether the Authorized Officer can violate the condition stipulated in Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 and proceed to sell the secured asset on a date of his choice and by merely displaying the date of the fresh sale in the notice board of the respondent bank?
10. Rule 9(2) of the Security Interest (Enforcement) Rules, 2002 reads as under:
“ The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the Authorized Officer and shall be subject to confirmation by the secured creditor.”
11. A reading of the above said rule clearly reveals that the Authorized Officer is duty bound to confirm the sale in favour of the purchaser who has offered highest sale price in the bid.
12. Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 reads as under:
“The balance amount of purchase price payable shall be paid by the purchaser to the Authorized Officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.”
13. A reading of the above rule clearly reveals that the balance purchase price payable by the successful bidder cannot be paid by the successful bidder or received by the Authorized Officer without the confirmation of sale. A perusal of the records and the submissions of the Ld. Counsel for the Auction Purchaser made on 28.3.2012 reveals that the confirmation letter was not issued to the auction purchaser.
14. Rule 9(6) of the Security Interest (Enforcement) Rules, 2002 reads as under:
“On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the Authorized Officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules.”
15. A reading of the above rule reveals that the Authorized Officer cannot issue the sale certificate unless the confirmation of the sale is done and the terms of payments have been complied with. In this case it is seen that the confirmation has not taken place and therefore whatever sale certificate issued in this case is non est in law.
16. Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 reads as follows:
“The Authorized 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 is to be sold.
c) Reserve price, below which the property may not be sold;
d) Time and place of public auction of 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 deems it fit for a purchaser to know in order to judge the nature and value of the property.
Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 reads as follows:
“(1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule(6) or notice of sale has been served to the borrower.”
Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 stipulates that an immovable property cannot be sold without the paper publication of the sale notice as referred to in proviso to Rule 8(6) or the notice of the sale has been given to the borrower prior to 30 days of the sale. In this case the notice to the borrower had already been given and the sale notice had been issued on 22.1.2010 for the sale that was proposed to be held on 25.2.2010. The sale was not conducted on 25.2.2010 but was postponed to 5.3.2010 and neither any publication nor any public notice was made for the sale. The public notice is required for the purpose of inviting the public in order to get a higher price for the secured asset, which would enable the liquidation of the loan. In this case the Authorized Officer has simply put up a notice in the respondent bank’s notice board and merely displaying the notice regarding the postponement of the sale in the bank’s notice board cannot in any way deemed to be a public notice and also cannot be said to be an honest attempt by the Authorized Officer to get a higher price as the notice displayed in the notice board of the bank would be seen by the customers who have entered the bank during business hours alone. Moreover the property is situated in Perundurai and the auction has been conducted in Coimbatoreand it cannot be expected that person who are customers of the bank at Coimbatore would be interested to purchase the property at Perundurai which is situated at a distant place. Therefore the non providing of information about the postponement of the sale to the general public has caused prejudice to the borrower. Therefore the Authorized Officer though has power to postpone the sale for valid reasons has to take steps to make every honest attempt to get a higher price and also conduct the auction in a fair manner after duly informing the general public. In this case there was no proper notice to the public and therefore it can be seen that the lone bidder who has submitted his bid on 24.1.2010 had the bid knocked down in his favour and the non publication of the postponement of the sale to the general public has given the lone bidder an unfair advantage over the others and he has thus got the property. Though the publications have been taken out for the earlier proposed sale and though the notice has been given before the sale, though it superficially appears that the Authorized Officer has obeyed Rule 9(1), it can be seen that the Authorized Officer has de facto has gone against the Rules which have been framed to enable the bank to get the best price and therefore the Authorized Officer by his act has caused prejudice to the borrower by denying other members of the public to participate in the auction by failing to make the postponement of the sale public in a manner that the Rules prescribe and has also caused prejudice to the secured creditor, where the secured creditor has lost the opportunity of getting a higher amount towards the recovery of its dues.
17. It is also seen that in paragraph 8 of the order of the Ld. Presiding Officer, the Tribunal below has come to the conclusion that for the subsequent or repeated sales if conducted by public auction, it would be necessary to publish the sale notice in newspapers and affixing the same on property and personal service on the borrowers would not be a mandatory requirement. However, it is seen in this case that for the subsequent sale conducted by the Authorized Officer on 5.3.2010, the said postponement notice has not either been published in the newspaper nor pasted on the secured asset but it is only stated to have been put up in the notice board of the first respondent. Therefore, even according to the findings of the Ld. Presiding Officer the sale conducted on 5.3.2010 has not been conducted in a manner known to law and further that the property has been sold in contravention of the SARFAESI Act and the Rules made thereunder.
18. Therefore from the fact that the Authorized Officer has not issued the letter of confirmation of the sale in favour of the successful bidder, from the fact that the Authorized Officer had not taken sufficient steps to protect the interest of the borrower as enshrined in the provisions of the Act and the Rules made thereunder, from the fact that the Authorized Officer also has not safeguarded the interest of the bank by not choosing to hold the auction after properly and sincerely informing the members of the public, from the fact that the Authorized Officer has enabled the successful bidder to avoid any competition to his bid this Tribunal is driven to conclude that the sale has not been conducted in a fair and a proper manner and it has to be concluded that the auction conducted in this case is liable to be set aside.
19. In the result the appeal is allowed.
20. The sale conducted by the Authorized Officer on 5.3.2010 is hereby set aside.
IA 705/2011 (Waiver): RA(SA) is allowed. Hence this IA is closed.
The above Order was passed by the Hon''ble Chair Person of DRAT ,Chennai on 7th Aug 2012
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