TMI Blog2017 (3) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... f the immovable secured asset. High Court has committed a manifest error in assuming that the notice of intention of sale to be given to the borrower and a public notice for sale cannot be simultaneously issued. The High Court was also not right in observing that after a notice regarding intention to sell the secured asset under sub-rule 6 of Rule 8 is given by the authorized officer to the borrower, only on expiry of 30 days therefrom can the secured creditor take a decision about the mode of sale referred to in sub-rule 5 of Rule 8 after giving notice to the borrower and then issue a public notice after expiry of further thirty days. By this interpretation, the High Court has virtually re-written the provisions and inevitably extended the time frame of 30 days specified in sub-rule 6 of Rule 8 (atleast in relation to the sale of secured asset by inviting tenders from the public or by holding public auction). There is no need to wait for the expiry of 30 days from issuance of notice of intention to sell the secured asset given to the borrower, for publication of a public notice for sale of such asset. Nor is there any requirement to give a separate individual notice prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell known that the Rules made under a Statute are only essentially intended to secure effective implementation of the provisions contained in the Statute. In our opinion, therefore, putting the borrower on notice of 30 days duration by the secured creditor conveying the intention to put the secured asset to sale is mandatory. Such notice would be applicable even if the secured creditor later on decides to adopt any one of those four methods provided in clauses (a) to (d) of sub-rule (5) of Rule 8 of the Rules. As was already noticed supra, in cases of obtaining quotations from persons dealing with similar secured assets and also by entering into a private treaty, may not require publication of the intended sale in newspapers. Hence, without, first of all, putting the borrower on notice, threatening that the prospects of liquidation of the secured asset by any of the methods specified under sub-rule (5) of rule 8 of the Rules would not only sub-serve the object behind sub-section (8) of Section 13 of the Act, but would, in fact, enhance the efficacy of realizing/securitizing the secured asset. As was already held by us, the secured asset is liable to be sold only in the event of def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uer. That upset price was accepted by the appellant bank. Whereafter, a notice of sale (e-auction notice) was issued on 15.10.2015. Notice in terms of Rule 8(6) was also given to the principal borrower and both the guarantors, including the respondent no.1, to give them one last and final opportunity to discharge the debt within 30 days from the date of the said notice. A copy of e-auction notice was also enclosed along with the said communication served on the borrower and the guarantors, indicating that the sale date was fixed as 21.11.2015. The respondent no.1 (guarantor), on 04.11.2015, requested the appellant bank to permit him to avail of one time settlement of dues by offering ₹ 50 lacs in two installments. That offer was rejected by the appellant bank, as it was not in consonance with the RBI guidelines. As per the e-auction notice, the auction was held on 21.11.2015. The property was sold to one Sri Jonnalagadda Rajashekher Reddy s/o Sri Venkatram Reddy who was the highest bidder, for an amount of ₹ 73,25,000/-. The respondent no.1 vide letter dated 01.12.2015 requested the Bank to furnish information about the e-auction. The said letter was replied to by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue on hand. 8. The purport and interplay of the provisions of the said Rules had come up for consideration before this Court in Mathew Varghese (Supra) . On analyzing the gamut of the provisions, this Court opined that the important feature of the provisions is that a free hand is given to the secured creditor for the purpose of enforcing any security interest created in favour of the secured creditor without the intervention of the Court or Tribunal. The only other relevant aspect was that such enforcement should be in accordance with the provisions of the 2002 Act. 9. Before we embark upon the dictum in the said decision, we deem it apposite to reproduce Rule 8 and 9 of the Rules of 2002. The same read thus: 8. Sale of immovable secured assets. (1) Where the secured assest is an immovable property, the authorized officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. (2) [The possession notice as referred to in sub-rule (1) shall also be published ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the authorized officer considers it material for a purchaser to know in order to judge the nature and value of the property. (7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorized officer deems if fit, put on the web-site of the secured creditor on the Internet. (8) Sale by any method other than public auction or public tender, shall be on such terms as may be settled between the parties in writing. 9. Time of sale, issues or sale certificate and delivery of possession etc. (1) No sale of immovable property under these rules shall be 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. (2) 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: Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above. (10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not. 10. Reverting to the decision in Mathew Varghese (supra), in paragraphs 30, 31 and 33 of the said decision, the court observed thus: 30. Therefore, by virtue of the stipulations contained under the provisions of the SARFAESI Act, in particular, Section 13(8), any sale or transfer of a secured asset, cannot take place without duly informing the borrower of the time and date of such sale or transfer in order to enable the borrower to tender the dues of the secured creditor with all costs, charges and expenses and any such sale or transfer effected without complying with the said statutory requirement would be a constitutional violation and nullify the ultimate sale. 31. Once the said legal position is ascertained, the statutory prescription contained in Rules 8 and 9 have also got to be examined as the said Rules prescribe as to the procedure to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured asset of an immovable property is brought for sale, the intending purchasers should know the nature of the property, the extent of liability pertaining to the said property, any other encumbrances pertaining to the said property, the minimum price below which one cannot make a bid and the total liability of the borrower to the secured creditor. Since, the proviso to sub-rule (6) also mentions that any other material aspect should also be made known when effecting the publication, it would only mean that the intending purchaser should have entire details about the property brought for sale in order to rule out any possibility of the bidders later on to express ignorance about the factors connected with the asset in question. 33.3. Be that as it may, the paramount objective is to provide sufficient time and opportunity to the borrower to take all efforts to safeguard his right of ownership either by tendering the dues to the creditor before the date and time of the sale or transfer, or ensure that the secured asset derives the maximum price and no one is allowed to exploit the vulnerable situation in which the borrower is placed. (emphasis supplied) Again in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be effected under Section 13(8), the procedure prescribed under Rule 8 read along with Rule 9(1) has to be necessarily followed, inasmuch as that is the prescription of the law for effecting the sale as has been explained in detail by us in the earlier paragraphs by referring to Sections 13(1), 13(8) and 37, read along with Section 29 and Rule 15. In our considered view any other construction will be doing violence to the provisions of the SARFAESI Act, in particular Sections 13(1) and (8) of the said Act. (emphasis supplied) 11. In the impugned judgment, we find that the High Court has quoted or relied upon sub-rule 6 of Rule 8 as dealing with movable secured assets. This is incorrect. For, the correct version of Rule 8(6) refers to immovable secured assets and not movable, as noted by the High Court. Be that as it may, there is no difficulty in accepting the observation of the High Court that possession notice is distinct from the notice for sale of the secured asset. In that, possession notice is required to be given in terms of Rule 8(1) read with 8(2). Whereas, a notice of intention of sale is required to be given to the borrower in terms of Rule 9(1) read with Rule 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y days. By this interpretation, the High Court has virtually re-written the provisions and inevitably extended the time frame of 30 days specified in sub-rule 6 of Rule 8 (atleast in relation to the sale of secured asset by inviting tenders from the public or by holding public auction). 14. To put it differently, the only restriction placed on the secured creditor is to serve a notice of 30 days on the borrower intimating him about its intention to sell the immovable secured asset and the mode and date fixed for sale; and also to issue a public notice in two leading newspapers, if the sale of such secured asset is effected either by inviting tenders or by holding public auction, notifying the date of sale after 30 clear days from such notice. There is no need to wait for the expiry of 30 days from issuance of notice of intention to sell the secured asset given to the borrower, for publication of a public notice for sale of such asset. Nor is there any requirement to give a separate individual notice prior to deciding on the mode of sale of the secured asset. To the above extent, the opinion of the High Court in the impugned judgment will have to be overturned. 15. In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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