R. D. Khare, Chairperson
1. The present appeal has been filed 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 and order dated 27.10.2020 passed by the DRT, Allahabad, whereby the securitization application filed by the appellant was partly allowed.
2. The brief facts of the matter are that respondent No.1 was granted financial assistance by the appellant-Bank through its proprietor respondent No. 2 and the respondents No. 2 and 3 stood as guarantors to the said loan and created equitable mortgage over their two properties by depositing the title deed with the appellant-Bank. Since the respondents-borrowers did not maintain the financial dispute, therefore, the loan account was classified as NPA and demand notice dated 31.08.2012 was issued under section 13(2) of the SARFAESI Act, 2002 for a sum of Rs. 2,47,56,456/-. Since the respondents-borrowers did not pay any heed to the said demand, therefore, the symbolic possession of property in question was taken by the appellant-Bank by issuing possession notice dated 01.12.2012 under section 13(4) of the said Act. Thereafter, the auction sale notice dated 21.09.2019 was issued for auction of the property in question.
3. The borrowers challenge the entire proceedings of the Bank including the sale notice dated 21.09.2019 by filing the S.A. No. 599/2019 before the Tribunal below. Since the auction sale notice dated 21.09.2019 could not be materialized, therefore, another auction sale notice was issued by the Bank on 23.01.2020 scheduling the auction for 10.02.2020, but the same could not also be materialized for want of bidders.
4. It appears that in the meantime the borrowers and the Bank had entered into one time settlement on 23.08.2017 and the same was partially acted upon and the property situated at Noida was released on deposit of Rs. 41.50 lacs. Subsequent to that, the appellant-bank again issued sale notice dated 24.02.2024 scheduling the auction of the property in question for 11.03.2020. The said sale notice was published in two Newspapers on 25.02.2020. The property in question was auctioned successfully and after deposit of entire sale consideration of Rs. 1,65,44000/-, the sale certificate was issued on 02.04.2020 and sale deed was also executed on 20.08.2020 in favour of the respondent No. 4.
5. It transpires that the borrowers/respondents filed I.A. No. 277/2020 for impleadment of auction purchaser, I.A. No. 278/2020 for condonation of delay and I.A. No. 279/2020 for amendment with regard to the auction sale dated 11.03.2020 in the pending S.A. The Tribunal below vide order dated 29.09.2020 allowed the amendment and impleadment applications subject to the opportunity to the respondent-Bank to raise all objection on merit qua challenge to the legality of subsequent events with limitation aspects. Accordingly the amended S.A. was filed by the borrowers challenging the auction dated 11.03.2020.
6. The Tribunal below vide order impugned has partly allowed the S.A. of the respondents-borrowers holding that the auction sale conducted is in violation of mandatory Rules 8(6) and 9(1) of the Rules, 2002 by not giving 15 days’ clear notice and the respondents-borrowers have been given an opportunity to redeem the property in question by paying the value of mortgaged property in question i.e. sale consideration within 60 days to the respondent no.4 along with interest @ 8% per annum as well as the expenses incurred on stamp duty for registration of the sale certificate/sale deed and in case of failure, the same shall be refunded by the respondent-Bank. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
7. Learned counsel for the appellant submits that the impugned order has been passed without condoning the delay, therefore, the same cannot be sustained, which is annexed as Annexure No. 5 at page no 110 of the memo of the appeal, which is an application for condonation of delay and has referred to its para 3, wherein it has been stated by the respondent borrowers that on account of illegal activity of the Bank, the delay in filing the S.A. has occurred. There is nothing on record to show that what illegal activity was done by the Bank. It was further submitted that the auction sale notice was served, published and affixed as per the procedures laid down in the SARFAESI Act and the Rules made thereunder. The learned counsel also submitted that the purpose of service of 30/15 days sale notice before the auction under Rule 8(6) is to provide an opportunity to the borrowers/mortgager to redeem the property, but in the present case the respondents-borrowers have never come forward at any stage to deposit the outstanding amount to redeem their property. In support of his contention, the learned counsel for the appellant has relied upon a judgment passed by the Hon’ble Apex Court in Civil Appeal No. 3413/2020- M/s L & T housing finance Ltd. Vs. M/s Trishul Developers and Anr, decided on 27.10.2020, wherein it has been held that in significant/minor procedural lapses is not a ground to nullify the SARFAESI proceedings initiated by the secured creditor, if no substantial prejudice was cause to the borrower. It was thus prayed that the order impugned may be set-aside and the appeal may be allowed.
8. Learned counsel for the respondents no. 1, 2 and 3 submitted that due to pandemic of Covid 19, an order was passed by the Hon’ble Supreme Court on 23/09/2021 on delay in Suo Moto Writ Petition No. 3/2020. In view of the said judgment, there was no delay in filing of the said S.A., therefore, the contention raised by the appellant bank is not sustainable.
9. The learned counsel for the respondents- borrowers further submits that the sale notice was served to respondent no 1 on wrong address and description of the property as detailed in the auction notice is different from the details given in the notice u/s 13(4) of the SARFAESI Act, hence there is violation of Rule 8(6) of the Rules, 2002. In addition to it, the learned counsel for the respondents-borrower submitted that the auction sale notice dated 24.02.2020 was served and published on 25.02.2020 and the auction took place on 11.03.2024, which is on 15th day from the date of service and publication of the sale notice, as such there is violation of Rule 8(6) of the Rules, 2002. Thus, the Tribunal below has rightly set-aside the auction proceedings dated 11.03.2020 of the appellant-Bank, so the order impugned does not call for any interference by this Appellate Tribunal, hence, the may be dismissed with heavy costs.
10. Having heard the learned counsels for the parties and considering the material available on record, it is undisputed that the findings recorded by the Tribunal below with regard to the service of the demand notice and possession notice has attained finality, because the said findings have never been challenged by any of the borrowers.
11. The controversy involved in the present case is, as to whether the application for condonation of delay has been decided properly by the Tribunal below or not and as to whether the appellant-Bank has complied with the Rules 8(6) and 8(5) of the Rules, 2002 or not?
12. So far as the auction sale is concerned, it is to be seen that the S.A. was filed by the respondents-borrowers along with application for condonation of delay on 14.10.2019 challenging the demand notice dated 31.08.2012 and the possession notice dated 01.12.2012, auction sale notice dated 21.09.2019. Since the said sale could not be materialized for want of bidders, therefore, the subsequent sale notice dated 24.02.2020 was issued, scheduling the auction on 11.03.2020. It is averred that the respondents-Borrowers filed the I.A. No. 277/2020 for impleading the auction purchaser, I.A. No. 278/2020 for condonation of delay and I.A. No. 279/2020 for amendment with regard to auction sale dated 11.03.2020 and the Tribunal below vide order dated 29.09.2020 has allowed the amendment and impleadment applications subject to the respondent-Bank to raise all objection on merit including the limitation aspect. As per the record, the amended S.A. was filed on 29.09.2020 and the auction sale notice was issued on 24.02.2020 fixing the auction on 11.03.2020 and the auction sale was published on 25.02.2020. As such, it is clear that the amended S.A. filed by the borrowers was apparently barred by time with regard to the auction sale.
13. The limitation period for filing the S.A. is 45 days from the date, on which the measures had been taken as provided under section 17(1) of the SARFAESI Act. It is observed that no finding whatsoever has been recorded by the Tribunal below with regard to limitation. It is also seen that the S.A.-applicant had filed the application for condonation of delay along with the amendment application with regard to the auction sale dated 11.03.2020.
14. The application cannot be decided on merits, unless the delay is condoned. Thus, the Court/Tribunal has to decide the issue of limitation first, even if, there is no application for condonation of delay or any objection from the opposite side and further, a case cannot be decided on merit, unless the issue of limitation is settled.
15. As stated above, the respondents-borrowers had filed the application for condonation of delay along with the amendment application, but the Tribunal below has not considered this aspect, as was mandatorily required by it. The Tribunal below ought not to have passed the order on merit without deciding the limitation issue. Since the issue of limitation is a mixed question of law and the fact that the Tribunal below has not whispered anything about the limitation despite there being application for condonation of delay, therefore, I deem it appropriate to remand this matter back to the Tribunal below to decide the limitation aspect after affording opportunity of adducing the evidence and hearing to the parties concerned.
16. In view of the aforesaid, the impugned order dated 27.10.2020 is set aside, the appeal is allowed and the matter is remanded back to the Tribunal below with the direction to decide the limitation issue first, after affording opportunity of adducing the evidence and hearing to the parties concerned and thereafter, if necessary, to adjudicate the matter on merits afresh. No order as to costs.
17. Parties shall appear before the Tribunal below on 22.05.2024.
18. A copy of this judgment be forwarded to the parties as well as to the DRT concerned and be also uploaded on the e-DRT portal.
