R. D. Khare, Chairperson
1. The present appeal has been preferred by the appellant under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) against the judgment dated 27.08.2018 passed by the DRT, Dehradun, whereby the securitization application (for short "S.A.") filed by the appellant was partly allowed.
2. The factual matrix of the matter in brief is that the respondents no. 1 to 3 were granted some financial assistance by the appellant-Bank and they stood as guarantor for the said loan by creating equitable mortgage over their properties. The borrowers did not maintain the financial discipline, therefore, the accounts became non performing asset (NPA). The appellant Bank issued two demand notices dated 20.09.2016 to the respondent nos. 1 to 3 demanding Rs. 49,99,549.21 and Rs. 33,59,925.86, totaling Rs. 83,55,475.07 in both the loan accounts. Since the borrowers did not pay any heed to the said demands, therefore, the appellant-Bank issued possession notice dated 26.12.2016 under section 13(4) of the SARFAESI Act. Thereafter, the Bank filed an application under section 14 of the SARFAESI Act before the District Magistrate, Dehradun on 31.12.2016, which was allowed vide order dated 06.02.2017 directing the Sub District Magistrate, Sadar to provide the possession of the mortgaged property in question.
3. It appears that the borrower filed a writ petition no.114/2017 before the Hon’ble High Court, Uttarakhand at Nainital, which was disposed off vide order dated 13.01.2017 directing the Bank to consider the valuation report of the said property given by the government approved valuer at the time of auctioning the properties of the borrowers.
4. It appears that thereafter the appellant-Bank has issued notice three times for auction of the mortgaged property of the borrower i.e. on 11.04.2017, 23.06.2017 and 05.08.2017, but the sale could not be materialized for want of bid. Ultimately, the appellant-Bank issued 4th auction sale notice to the borrower on 11.08.20217 scheduling the auction for 31.08.2017 with the reserve price of Rs. 95.00 lacs and the same was given to the concerned office of the newspaper on 13.08.2017 for publication, but the same was published on 17.08.2017. The property was auctioned/sold for Rs. 95.10 lacs and sale certificate was issued on 04.09.2017.
5. The respondents-Borrowers challenged the actions of the appellant-Bank before the DRT, Dehradun by filing the S.A. No. 97 of 2017 on 07.10.2017, which was partly allowed by the impugned order holding that the auction conducted on 31.08.2017 on the basis of e-auction notice published on 17.08.2018 was in violation of mandatory provisions of Rule 8(6) and 9(1) of the Rules, 2002, hence the sale notice dated 11.08.2017, which was delivered to the borrower on 16.08.2017, impugned e-auction notice published on 17.08.2017 and auction proceeding conducted on 31.08.2017 and subsequent proceedings thereof have been set aside. It was further directed that the physical possession of the property in question be returned to the borrower within one month and the auction money be refunded to the respondent no. 4 along with interest @ 8% per annum. Being aggrieved by the said order, the present appeal has been filed by the appellant.
6. Learned counsel for the appellant submitted that the only point to be considered in the present case is, as to whether the auction can be held on 15th day from the date of publication of the sale notice as per law? The learned counsel further submitted that except the said issue, there is no other question involved in the present case.
7. Learned counsel for the respondents-Borrowers submitted that the appellant-bank has published the sale notice on 17.08.2017 and the auctioned the property in question on 31.08.2017 i.e. on 15th day, which is in violation of Rule 9(1) of the Rules, 2002. In support, the learned counsel has relied upon a judgment passed by the Hon’ble Supreme Court in Mathew Verghese Vs. M. Amritha Kumar & Ors., AIR 2015 SC 501.
8. Learned counsel for the respondents-Borrowers further submitted that there is no question of waiver of any right of the borrowers to challenge the impugned auction sale notice of the property in question, as the notice dated 08.09.2017 has not been filed by the appellant-Bank and the respondent nos. 1 & 3 have never signed the notices dated 16.08.2017 and 15.10.2017.
9. The learned counsel lastly submitted that the auction purchaser has no grievances against the impugned judgment and order dated 27.08.2018, as he has not preferred any appeal against the same. It is therefore, prayed that the appeal may be dismissed.
10. Considered the rival contentions of the learned counsels for the parties and perused the record.
11. It is undisputed that the sale in question was 4th sale, therefore, the Bank was required to serve 15 days’ sale notice to the borrowers/guarantors before auction of the property. The record submitted by the Bank discloses that the sale notice dated 11.08.2017 was delivered to the borrowers on 16.08.2017 and the same was published in the newspapers on 17.08.2017. The sale was conducted on 31.08.2017, as such there was no clear 15 days’ sale notice to the borrowers even from the date of delivery and not even from the date publication. Thus the property was sold on 15th day from the date of delivery and within 15 days from the date of publication. The Hon’ble Supreme Court has laid down in Mathew Varghese Vs. M. Amritha Kumar (Supra) that the terms “or” mentioned under Rule 9(1) shall be read as word “and”. The proviso to Rule 9(1) also provides that “the authorized officer shall serve, affix and publish the notice of sale for not less than 15 days to the borrowers for any subsequent sale. The Hon’ble Allahabad High Court has also held in the case of Dayanath Pandey Vs. State of U.P. and others, 2008(3) ADJ 235 (DB) that the 30 days’ notice for sale of the property is mandatory in nature.
12. Thus, it is obvious that for the subsequent sale, the Bank is required to provide 15 days’ sale notice to the public at large by publishing the sale notice in the newspapers and simultaneously a 15 days’ sale notice is required to be served to the borrowers/guarantors separately. In the case at hand, the appellant-Bank has neither served the 15 days’ sale notice to the borrower nor published the same in the newspapers.
13. Service of 15 days’ auction sale notice is a statutory requirement and service of the same is a substantial right of the borrowers. Any deviation from this provision is a substantial procedural irregularity, which cannot be said to be of minor nature. Such statutory requirement is required to be strictly followed by the Bank and cannot be ignored on the ground that no prejudice was caused to the borrowers. The Bank cannot take the advantage of the situation that the borrowers have never intended to redeem the property nor have deposited any amount. Thus, the Bank has failed to serve 15 days’ sale notice before auction of the property and the Tribunal below has rightly set aside the sale and consequential proceedings initiated pursuant to the said auction sale notice.
14. So far as the waiver of right of the respondents-borrowers to challenge auction/sale notice is concerned, it is observed from the letter dated 15.10.2017, which is filed by the appellant at page no. 292 of the memo of appeal, that there is no such averment, which may show that the respondents-borrowers have waived their right to challenge the auction sale notice dated 11.08.2017. Moreover, it prima facie appears that none of the respondents-borrowers have signed the said letter, as in the bottom of the said letter, name of Ajay Kumar is written, but the signature made above the name of Ajay Kumar does appear to be of Ajay Kumar. As such the contention of the appellant that the respondents-borrowers have waived their right to challenge the auction sale notice is not tenable.
15. In view of the above, the appeal is devoid of merits, hence the same is dismissed with no order as to costs.
16. A copy of this judgment be sent to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.
