SARFAESI – Fresh 30 Days Notice Not Needed If Failure To Conduct Sale As Per First Notice Was Due To Borrower’s Actions
Case: S.Karthik & Ors vs. N.Subhash Chand Jain & Ors.
Coram: Justice L.Nageswara Rao, Justice B.R.Gavai, Justice B.V.Nagarathna
Case No: Civil Appeal Nos.5920 – 5923/2021
Court Observation: “Rule 9(1) of the said Rules prescribed that no sale of immovable property under the said Rules would take place before the expiry of 30 days from the date on which the public notice of sale was published in the newspapers or notice of sale has been served to the borrower”
“Under Rule 9(1), it is prescribed that no sale of an immovable property under the Rules should take place before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers as referred to in the proviso to subrule (6) of Rule 8 or notice of sale has been served to the borrower. Subrule (6) of Rule 8 again states that the authorised officer should serve to the borrower a notice of 30 days for the sale of the immovable secured assets. Reading subrule (6) of Rule 8 and subrule (1) of Rule 9 together, the service of individual notice to the borrower, specifying clear 30 days’ timegap for effecting any sale of immovable secured asset is a statutory mandate. It is also stipulated that no sale should be affected before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers. Therefore, the requirement under Rule 8(6) and Rule 9(1) contemplates a clear 30 days’ individual notice to the borrower and also a public notice by way of publication in the newspapers.”
“In the event of any such sale properly notified after giving 30 days’ clear notice to the borrower did not take place as scheduled for reasons which cannot be solely attributable to the borrower, the secured creditor cannot effect the sale or transfer of the secured asset on any subsequent date by relying upon the notification issued earlier. In other words, once the sale does not take place pursuant to a notice issued under Rules 8 and 9, read along with Section 13(8) for which the entire blame cannot be thrown on the borrower, it is imperative that for effecting the sale, the procedure prescribed above will have to be followed afresh, as the notice issued earlier would lapse.”
“In the event of any such sale properly notified after giving a 30 days’ clear notice to the borrower did not take place as scheduled for reasons, which cannot be solely attributable to the borrower, the secured creditor cannot effect the sale or transfer of the secured asset on any subsequent date by relying upon the notification issued earlier.”
“In the event of any such sale properly notified after giving a 30 days’ clear notice to the borrower did not take place as scheduled for reasons, which cannot be solely attributable to the borrower, the secured creditor cannot effect the sale or transfer of the secured asset on any subsequent date by relying upon the notification issued earlier”.
“…even in view of the law laid down by this Court in the case of Mathew Varghese (supra), since the sale scheduled on 27.2.2012, as per the First Sale Notice dated 21.1.2012, could not be held due to the reasons attributable solely to the guarantors, there was no necessity of again following the same procedure of providing a 30 days’ clear notice.
“It could thus be seen that the appellants had more than one opportunity for redemption of the mortgage. However, from their conduct, it appears that they were only interested in protracting the litigation. It is the appellants at whose intervention and on whose incorrect representation, the sale, which was scheduled to be held on 27.2.2012 in pursuance of the notice dated 21.1.2012,could not be held. Even after the dismissal of S.A. No.69 of 2012 on 2.7.2012, the respondent Bank again issued a Second Sale Notice on 9.7.2012 scheduling the sale on 20.7.2012 in which the auction purchaser emerged as a successful bidder. It is thus clear that the appellants had enough time from 21.1.2012 till 2.7.2012 for redemption of their mortgaged properties. However, they did not avail of that opportunity.”
“In the case of Mathew Varghese (supra) after the dismissal of S.A., the respondent Bank had surreptitiously accepted the tender of the auction purchaser on the very next day of dismissal of S.A. without issuing a notice to the guarantors/borrowers and also confirmed the sale, and only after the confirmation of sale and receipt of the entire amount, informed the borrowers/guarantors about the sale being confirmed. It is not the case here. In the present case, after the S.A. was dismissed on 2.7.2012, the respondent-Bank again issued a fresh Notice on 9.7.2012 scheduling the sale on 20.7.2012”.
“Clearly, in the present case, there has been compliance with the same, insofar as the first notice is concerned, whereas in the case of Mathew Varghese (supra), there was no 30 days’ period between individual notice and the date of sale”.
“It has been held, that only on execution of the conveyance and registration of transfer of the mortgagor’s interest by registered instrument, that the mortgagor’s right of redemption will be extinguished. In the present case, the DRT,Chennai, vide order dated12.9.2012, had granted liberty to the respondent Bank to proceed with the sale. The sale came to be registered in favour of the auction purchaser on 14.9.2012. As such, in any case, the mortgagor’s right of redemption stood extinguished on 14.9.2012.”
“The SARFAESI Act was enacted with the purpose for securitization and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the Court.” “If we look at the facts in the present case, it would show that, every attempt has been made to frustrate the purpose of the SARFAESI Act. The RespondentBank was required to indulge in three rounds of litigations, out of which, the two have reached upto this Court.”
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Keywords
SARFAESI, 30 Days Notice, Borrower’s Actions, SARFAESI Act
