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2014 (4) TMI 943 - SC - Indian LawsValidity of auction sale - Violation of mandatory Rules 8 and 9 of SARFAESI Act - Proper notice not issued - Valuation of property not done before auction sale - High Court set aside sale - Held that:- there were no terms settled in writing between the parties that the sale can be affected by Private Treaty. In fact, the borrowers – respondent Nos. 1 and 2 were not even called to the joint meeting between the Bank – Respondent No.3 and Ge-Winn held on 8th December, 2006. Therefore, there was a clear violation of the aforesaid Rules rendering the sale illegal - generally proceedings under the SARFAESI Act, 2002 against the borrowers are initiated only when the borrower is in dire-straits. The provisions of the SARFAESI Act, 2002 and the Rules, 2002 have been enacted to ensure that the secured asset is not sold for a song. It is expected that all the banks and financial institutions which resort to the extreme measures under the SARFAESI Act, 2002 for sale of the secured assets to ensure, that such sale of the asset provides maximum benefit to the borrower by the sale of such asset. Therefore, the secured creditors are expected to take bonafide measures to ensure that there is maximum yield from such secured assets for the borrowers. Sale consideration is only ₹ 10,000/- over the reserve price whereas the property was worth much more. It is not necessary for us to go into this question as, in our opinion, the sale is null and void being in violation of the provision of Section 13 of the SARFAESI Act, 2002 and Rules 8 and 9 of the Rules, 2002. letter dated 13.11.2006 sent by the borrower to the Bank clearly depicted that the borrower had waived his right under Rule 9 (1) and the provisions contained in Rule 9(3) and Rule 9(4) as well. It was also found that at the time of auction sale on 11.1.2006, the borrower was present but did not object to the auction being held before expiry of 30 days from the date of which public notice of sale was published. Not only this, he agreed that the bid given by the auction purchaser, which was the highest bid, be accepted as the auction purchaser happened to be his known person. Another important feature which was noted was that the borrower expressly gave consent in writing that the balance sale price may be accepted from the auction purchaser even when tendered after some delay and the sale certificate be issued to him. There was a written agreement between the borrower and the Bank for extension of time upto 15.4.2006 within which the auction purchaser had made the payment. Court came to the conclusion that condition in Rule 9(4) viz. “such extended period as may be agreed upon in writing between the parties” would be treated as substantially satisfied. Again, pertinently, the Writ Petition was filed by the borrower more than 4 years after the issuance of the sale certificate. On these facts the court concluded that there was a waiver of the aforesaid mandatory provisions by the borrower. From what is argued by the appellants, at best it can be inferred that the borrower tried to thwart the earlier attempts of the Bank in selling the property. When the first notice was issued, the borrower filed the writ petition. However, it is to be borne in mind that in the said Writ Petition no interim order was passed staking the auction on the stipulated date. The only stay granted was against confirmation of sale. That did not preclude anybody from participating in the auction. We are mindful of the ground realities that many times pendency of such a Writ Petition challenging the auction notice and the kind of stay granted, even partial in nature, deter the intending buyers to come forward and participate in the auction. Be as it may, we find out that even in the second attempt when the reserve price was reduced to ₹ 2.39 crores, the highest bid received was in the sum of ₹ 2.25 crores. Further, even the bid of the appellant which was accepted was in the sum of ₹ 2.16 crores. Likewise, after the second auction when the Bank requested the borrower to accept the bid of ₹ 2.25 crores giving its reasons and the borrower instead of doing so took initiative resulting in OTS but defaulted therein, it would merely indicate that the borrower was at fault in not adhering to the OTS. By no logic it can be deduced therefrom that the Bank was relieved from its obligation not to follow the mandatory procedure contained in the Rules, while taking fresh steps for the disposal of the property - Sale set aside - Order of High Court confirmed - Decided against appellant.
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