2005 (1) TMI 416 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the sale notice issued by the bank.
2. Compliance with the statutory requirements under the Securitisation Act and related rules.
3. Right of redemption of the borrower.
4. Procedural lapses in the auction process.
5. Availability of alternative remedies under the Securitisation Act.

Detailed Analysis:

1. Validity of the Sale Notice Issued by the Bank:
The petitioners challenged the sale notice dated 30th October 2004 issued by the respondent bank. The notice called for offers by 5th November 2004 and stated that the auction would take place on the same day. The petitioners argued that the notice was defective as it did not comply with the statutory requirement of providing a 30-day notice period before the sale.

2. Compliance with Statutory Requirements:
The petitioners contended that the bank failed to adhere to the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, particularly Section 13(8) and the Security Interest (Enforcement) Rules, 2002. Rule 8(6) mandates a 30-day notice to the borrower before the sale of the immovable secured assets, and Rule 9(1) requires that the sale should not take place before the expiry of 30 days from the date of the public notice. The petitioners argued that these requirements were not met.

3. Right of Redemption of the Borrower:
The petitioners emphasized their right to redeem the property under Section 13(8) of the Act, which allows the borrower to clear the dues along with costs, charges, and expenses any time before the date fixed for the sale. The petitioners cited the Supreme Court's observations in Mardia Chemicals Ltd. v. Union of India to support their argument that the right of redemption is preserved until the final sale of the property.

4. Procedural Lapses in the Auction Process:
The petitioners pointed out several procedural lapses in the auction process. They argued that the notice of sale was published on 30th October 2004, but the bids were called for by 5th November 2004, violating the 30-day notice period required under Rule 9(1). Additionally, the successful bidder did not deposit the required 25% amount immediately, and the sale was confirmed by the bank without receiving the full payment within the stipulated time.

5. Availability of Alternative Remedies:
The respondents argued that the petitioners had alternative remedies available under the Securitisation Act, such as filing an appeal under Section 17 against the measures taken by the bank and an appeal under Section 18 against the order of the Debts Recovery Tribunal (DRT). However, the court noted that the rule of exhaustion of internal statutory remedies is a rule of self-limitation and can be relaxed in appropriate cases.

Conclusion:
The court found that the bank did not comply with the mandatory requirements of the statutory rules, particularly the 30-day notice period under Rule 8(6) and Rule 9(1). The court also recognized the petitioners' right of redemption under Section 13(8) of the Act. Consequently, the court allowed the petition, setting aside the sale notice dated 30th October 2004 and the order of the DRT rejecting the petitioners' Miscellaneous Application. The court directed the bank to return the petitioners' documents and refund the amount collected from the fourth respondent within 48 hours, and to return possession of the property to the petitioners immediately after 48 hours.

Order:
The petition was disposed of in favor of the petitioners, with the court rejecting the request for a stay of the order.