2013 (9) TMI 216 - SUPREME COURT

Rule 9 of the Security Interest (Enforcement) Rules - Held that:- The facts were eloquent and indicated that the observations made by the Single Judge that borrower was victimized and a fraud was practiced upon, have no basis - The finding by the Single Judge that the sale of secured interest had been in violation of borrower's right to livelihood and the observation of the Division Bench that non-compliance of Rule 9 hads violated, the borrower's right to property were misconceived - there was no justification whatsoever for the learned Single Judge to allow the borrower to by-pass the efficacious remedy provided to him under Section 17 and invoke the extraordinary jurisdiction in his favour when he had disentitled himself for such relief by his conduct - The Single Judge was clearly in error in invoking his extraordinary jurisdiction under Article 226 in light of the peculiar facts indicated above - The Division Bench also erred in affirming the erroneous order of the Single Judge

SARFAESI Act lays down the detailed and comprehensive procedure for enforcement of security interest created in favour of a secured creditor without intervention of the court or tribunal - Section 13(2) required the secured creditor to issue notice to the borrower in writing to discharge his liabilities within 60 days from the date of the notice - Such notice must indicate that if the borrower failed to discharge his liabilities, the secured creditor shall be entitled to exercise its rights in terms of Section 13(4) - A reading of sub-rule (1) of Rule 9 makes it manifest that the provision was mandatory - As regarded balance amount of purchase price, sub-rule (4) provided that the said amount shall be paid by the purchaser on or before the fifteenth day of confirmation of sale of immovable property or such extended period as may be agreed upon in writing between the parties - The period of fifteen days in Rule 9(4) was not that sacrosanct and it was extendable if there was a written agreement between the parties for such extension.

There was no doubt that Rule 9(1) is mandatory but this provision was definitely for the benefit of the borrower - Similarly, Rule 9(3) and Rule 9(4) were for the benefit of the secured creditor (or in any case for the benefit of the borrower) - It was settled position in law that even if a provision was mandatory, it can always be waived by a party (or parties) for whose benefit such provision had been made - The provision in Rule 9(1) being for the benefit of the borrower and the provisions contained in Rule 9(3) and Rule 9(4) being for the benefit of the secured creditor (or for that matter for the benefit of the borrower), the secured creditor and the borrower can lawfully waive their right - These provisions neither expressly nor contextually indicate otherwise – Order set aside.