Whether auction sell can be set aside on ground of non publication of auction notice in vernacular language?
Non-compliance of statutory requirements of publication of possession notice and auction notice in vernacular language rendered the statutory requirement as farce. There should be purposeful compliance of the provisions of law and it cannot be reduced to an empty formality. The requirement to cause publication in ‘vernacular language’ in the newspaper is fundamental and the statutory requirement which cannot be compromised. It is not for the borrower or guarantor to establish that non-publication of the said notices in -‘vernacular language’ in the newspaper has caused any prejudice to its cause. It is for the Respondents to establish that non compliance of the statutory requirements has not caused any prejudice at all.
42. In view of the above, both the writ petitions succeed and are allowed. All proceedings subsequent to notice under Section 13(4) of the Act, 2002 being in flagrant violation of the statutory provisions are liable to be quashed. The case is squarely covered by the judgments of the Apex Court referred to above,wherein the Apex Court held that not following the statutory provisions itself is a good ground for quashing the confirmed sale.
In the High Court of Allahabad
(Before Mahesh Chandra Tripathi, J.)
Ashok Kumar v.
Authorized Officer, Punjab National Bank And Others .
Writ - C No. - 66988 of 2012
Decided on February 10, 2017,
Citation: 2017 SCCONLINE ALL 333
Mahesh Chandra Tripathi, J.:—
2. In Writ C No. 14755 of 2013, the petitioner has prayed for quashing the order dated 6.3.2013 passed by the Debt Recovery Appellate Tribunal, Allahabad in Recall Sr. No. 390/12 in Appeal No. R-146/12. In the connected Writ C No. 66988 of 2012 the petitioner is assailing the order ex-parte judgment and order dated 12.12.2012 passed in Appeal No. R-146/2012 (Ashok Kumar v. Punjab National Bank) and for quashing the proceedings of Case No. 274 of 2012 (Punjab National Bank v. Ashok Kumar) under Section 14 of the SARFAESI Act, 2002.
3. Brief background of the case, as reflected from the record, is that the petitioner was serving in Punjab National Bank, Branch Mahmoorganj, Varanasi. During his service period, he availed a housing loan of Rs. 10 lacs in the year 2007 for construction of house and deposited title deed of Arazi No. 205/2, Village Phulwari, Pargana Dehat Amanat, District Varanasi as security. The petitioner committed defaults in payment of instalments. Consequently, the account was declared as ‘Non-Performing Asset’. The respondent-bank issued a demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) on 3.9.2010 for Rs. 9,00,458/- and thereafter possession notice dated 4.2.2011. The notice inviting tender for sale of security was published in the newspaper on 19.11.2011 fixing 18.12.2011. The property in question was sold to fourth respondent i.e. Smt. Janki Devi for Rs. 8,10,351/- and the sale certificate was issued on 28.12.2011. The sale deed was executed in favour of the fourth respondent on 6.1.2012 and the same was registered in the office of Sub Registrar-II, Varanasi on 16.3.2012. The fourth respondent came over the property in question on 10.3.2012 for taking possession.
4. The petitioner had proceeded to move an application under Section 17(1) of SARFAESI Act before the Debts Recovery Tribunal, Allahabad alleging that neither the petitioner was served with the notice dated 3.11.2011 under Section 13(2) of SARFAESI Act nor possession notice dated 4.2.2011. The minimum value of the property in question as per circle rate comes to Rs. 22,65,754/- but the property in question was grossly undervalued. The petitioner had no knowledge of the recovery proceedings prior to 10.3.2012. The Tribunal did not find any defect in the sale proceedings undertaken by the respondent bank as the petitioner slept over and forfeited his right to redemption and dismissed the application in question on 3.8.2012, holding that the petitioner's right to redeem security has lapsed with lapse of time. The Tribunal had observed that in the instant case the sale certificate was issued on 18.12.2011 and the sale deed executed was registered on 6.1.2012. The confirmation of sale was much prior to these dates. There is no whisper in the application that the petitioner tendered the debt or at least made any attempt for the same. The application was filed on 23.3.2012 and for the first time the submission was made that the petitioner was ready to pay his dues.
5. Aggrieved with the aforesaid order, the petitioner had proceeded to file a Writ C No. 40941 of 2012 (Ashok Kumar v. Authorized Officer, Punjab National Bank) and a Division Bench of this Court had disposed of the writ petition on 27.8.2012, giving liberty to the petitioner to seek his appropriate relief under Section 18 of the SARFAESI Act or before the District Magistrate. Thereafter, the petitioner filed an Appeal No. 146 of 2012 on 3.9.2012 before the Debt Recovery Appellate Tribunal, Allahabad and deposited a sum of Rs. 5 lakhs vide DD No. 151327 issued by Allahabad Bank on 17.9.2012 as required under proviso to Section 18 of the SARFAESI Act. The Appellate Tribunal had granted an interim order dated 25.9.2012 directing the parties to maintain status-quo with respect to the property in question and notices were issued to the opposite parties. On 26.11.2012 the respondent-bank filed its written statement and the date was fixed as 12.12.2012 but his counsel wrongly noted the date as 11.12.2012. On 11.12.2012 the petitioner went to the Tribunal and he was informed that the Chairman was not sitting and case would be taken up on 13.12.2012. When his counsel went to the Tribunal on 13.12.2012, he was informed by the office that his case had been dismissed on 12.12.2012. Immediately on 14.12.2012 he filed an application for recalling the ex-parte order passed by the Appellate Tribunal and 7th January, 2013 was fixed for consideration of his recall application. Since there was threat of dispossession, the petitioner filed the leading Writ C No. 66988 of 2012 and this Court had passed following interim orders on 20.12.2012:—
“According to Sri. M.M. Sahai, learned counsel for the petitioner, the petitioner filed application before the Debt Recovery Tribunal, which was dismissed. Whereafter he filed Appeal No. 146 of 2012 before the Debt Recovery Appellate Tribunal, Allahabad. According to him, the appellate tribunal granted an interim order dated 25.09.2012 directing the parties to maintain status-quo with respect to property in question.
Learned counsel while relying on the averments made in paragraphs 28, 29 & 30 of the writ petition states that on 26.11.2012 respondent-bank filed its written statement and the date was fixed as 12.12.2012 but his counsel wrongly noted the date as 11.12.2012. On 11.12.2012 the petitioner went to the tribunal and was informed that the member is not sitting and case will be taken up on 13.12.2012. Learned counsel states that when he went to the tribunal on 13.12.2012 he was informed by the office that his case has been dismissed on 12.12.2012. Learned counsel has submitted that immediately on 14.12.2012 he filed an application for recall of the ex-parte order passed by the appellate tribunal and 07.01.2013 has been fixed for consideration of his recall application.
He has pointed out to the impugned appellate order to state that it has been recorded that none appeared on behalf of the appellant even in the revised round. Learned counsel states that the impugned order passed by the appellate tribunal is ex-parte order due to the reasons detailed by the petitioner in paragraphs 28, 29 & 30 of the writ petition and as such the petitioner should not be made to suffer loss by dispossession from his house in question on the basis of ex-parte order when the petitioner is not at fault. He further states that the petitioner has already deposited Rs. 5,00,000/- in pursuance of condition precedent for maintaining his appeal before the appellate tribunal.
In view of the aforesaid circumstances, it appears that the petitioner is likely to be dispossessed from his house without being heard by the appellate tribunal although his appeal had been maintained by depositing of requisite amount. The circumstances pleaded indicate that he was not at fault hence he should not face adverse action for no fault on his part.
In view of the aforesaid circumstances, till the next date of listing or till disposal of his recall application by the Appellate Tribunal the respondents shall not dispossess the petitioner from the house in question in case he has not already been physically dispossessed.
It is made clear that the recall application may be decided by the Appellate Tribunal in accordance with law in the meantime.”
6. By the impugned judgment and order dated 6.3.2013 the Appellate Tribunal has rejected the recall application filed by the petitioner holding that the petitioner had failed to produce any prospective buyer of the property in question for a sum of Rs. 30 lakhs. The petitioner has filed the connected Writ C No. 14755 of 2013 in which an interim order was passed on 19.3.2013 to the following effect:—
“Connect with Writ Petition No. 66988 of 2012.
Heard Sri. M.M. Sahai, learned counsel for the petitioner, Sri. Sanjay Singh, learned counsel representing respondent nos. 1, 2 & 5 and the learned Standing Counsel representing respondent no. 3. Learned counsel for the respondent may file counter affidavit within a month.
Issue notice to the respondent no. 4 returnable within four weeks.
Submission advanced on behalf of the petitioner is that the appeal of the petitioner was decided exparte by the order dated 11.12.2012 on account of wrong noting of the date. When the petitioner appeared on 12.12.2012 the date noted by him he was informed that the Presiding Officer was not holding the Court and all the cases were to be taken up on 13.12.2012. But on 13.12.2012 the petitioner was informed that his appeal was dismissed on 11.12.2012 in absence of the petitioner. Immediately the petitioner filed a recall application on 14.12.2012 stating the aforesaid fact. The Tribunal rejected the application on the ground that petitioner failed to produce the auction purchaser for offering a sum of Rs. 30.00 lakhs and has further treated the application to be a review application. The Tribunal has not considered the cause for the absence on 11.12.2012.
Till further orders of this Court status quo would be maintained by the parties with regard to the property in dispute.”
7. Shri. M.M. Sahai, learned counsel for the petitioner submitted that the petitioner had proceeded to file the application in question under Section 17(1) of the SARFAESI Act before the Tribunal for quashing the sale certificate/sale deed dated 6.1.2012, alleging that the petitioner was not served with the notice dated 3.11.2011 under Section 13(2) of SARFAESI Act; he was not given possession notice dated 4.2.2011; the property in question was grossly undervalued; he had no knowledge of the recovery proceedings prior to 10.3.2012 but the Appellate Tribunal had ignored the questions raised by the petitioner and as such, the impugned order dated 6.3.2013 is liable to be quashed. The Appellate Tribunal has failed to appreciate that the petitioner was the employee of the respondent bank and his dues were sufficient to meet out the loan taken by the petitioner, even then due to personal prejudice the officers had initiated the proceeding under Section 13 of SARFAESI Act and the Tribunal had not recorded any finding on this point.
8. Shri. M.M. Sahai further submitted that no demand notice was ever served upon the petitioner and the respondent bank had only filed the evidence regarding notice under Section 13(4) and no evidence was filed indicating the service of demand notice but this aspect of the matter was not considered by both the Tribunal and Appellate Tribunal. The proceeding of sale has to be completed in terms of Rules 4, 6 and 9 of Security Interest (Enforcement) Rules, 2002 (in short, 2002 Rules). A joint reading of Rules 4, 6 and 9 of the 2002 Rules clearly indicates that after the proceeding of Section 13(3) the creditor will first take the possession of the secured assets, only thereafter the proceeding of sale will be initiated. In the present case, the possession of the petitioner was never disturbed and he remained in the possession prior to the proceedings, during the proceedings and after the proceedings and even till today. The action of the respondent bank is in clear violation of the provisions of the SARFAESI Act. The respondent bank had executed the sale deed, sale certificate and the sale deed was executed on 6.1.2012 and the application under Section 14 was also filed on the same date. Under the provisions of Indian Contract Act, 1872 such agreement is null and void and having no validity in the eyes of law.
9. It has been submitted that the application filed by the respondent bank under Section 14 of the SARFAESI Act before the third respondent was not maintainable, and as such the proceedings initiated under Section 14 of the SARFAESI Act are liable to be quashed. The petitioner has not been given any opportunity to deposit the amount and ignoring the provisions of law, firstly the sale deed was executed and the proceeding of possession has been carried out thereafter. After dismissal of the Original Application the bank had refunded the amount to the petitioner although the petitioner did not make any demand and the amount was sent through cheque/demand draft. The petitioner was suspended on 3.8.2008 and before his suspension, he was drawing gross monthly salary to the tune of Rs. 30,000/- and under the relevant service rules, he was entitled for subsistence allowance, which ought to have been half of the salary for initial six months and thereafter it goes up to 2/3 of the gross salary. Therefore, for the first six months the petitioner was entitled for subsistence allowance to the tune of Rs. 15,000/- per month and thereafter Rs. 20,000/- per month. The petitioner was not paid the subsistence allowance in a regular manner creating deficiency in his account. Moreover, after the order of compulsory retirement the petitioner was entitled for pension and other service benefits and the said amount was sufficient to meet out the deficiency in the loan account. The respondent bank has deliberately not paid the subsistence allowance causing hardship to the petitioner.
10. Shri. M.M. Sahai has further submitted that the Appellate Tribunal has failed to appreciate that the petitioner was the employee of the respondent bank and his dues were sufficient to meet out the loan taken by him. Even then the officers due to personal prejudice had initiated the proceeding under Section 13 of the SARFAESI Act and the Tribunal did not record any finding on this point. The respondent bank has treated the petitioner as suspended/terminated employee and demanded Rs. 9,00,458/- as on 30.9.2010 and directed him to deposit the same amount within 15 days. For extraneous consideration the respondent bank has treated him as suspended/terminated employee, whereas the petitioner was compulsorily retired on 24.10.2009 and as such, the entire proceeding carried out by the respondent bank is illegal. In the letter dated 16.8.2011 it has been admitted by the respondent-bank that a sum of Rs. 7,38,841/- was received by the bank towards the retiral benefit like gratuity and provident fund and pay revision, which was adjusted by the bank in other accounts without giving any information to the petitioner. As per letter of the bank dated 16.8.2011, the respondent bank had received Rs. 3,51,033.77 on 23.3.2010; Rs. 2,67,087/- & Rs. 14,446/- on 17.4.2010 towards arrears of wages and Rs. 82,953/- towards gratuity and the total amount was adjusted in the housing loan account. Even then the notice under Section 13(2) was issued for Rs. 9,00,458/- and the officers and servants of the bank had acted for their own interest.
11. Shri. M.M. Sahai placed much emphasis regarding clear 30 days' notice, which is required to be given to the borrower and has placed reliance on the judgment of Supreme Court in Mathew Varghese v. M. Amritha Kumar(2014) 5 SCC 610 in which it was held that until a clear 30 days' notice is given to the borrower, no sale or transfer can be resorted to by a secured creditor. Paras 52, 53, 54 and 55 of the judgement are reproduced herein under:—
“52. Keeping the said basic principle in applying the above provisions in mind, when we refer to Rule 15 of the Income Tax Rules, 1962, in the first place it will have to be stated that a reading of the said rule does not in any way conflict with either Section 13(8) of the SARFAESI Act or Rules 8 and 9 of the Rules, 2002. As far as sub-rule (1) of Rule 15 is concerned, it only deals with the discretion of the Tax Recovery Officer to adjourn the sale by recording his reasons for such adjournment. The said Rule does not in any way conflict with either Rules 8 or 9 or Section 13, in particular subsection (1) or sub-section (8) of the SARFAESI Act. Therefore, to that extent there is no difficulty in applying Rule 15. As far as sub-rule (2) is concerned, the same is clear to the effect that a sale of immovable property once adjourned under sub-rule (1) for a longer period than one calendar month, a fresh proclamation of sale should be made unless the defaulter consents to waive it. The said sub-rule also does not conflict with any of the provisions of the SARFAESI Act, in particular Section 13 or Rules 8 and 9. In fact there is no provision relating to grant of adjournment or issuance of a fresh proclamation for effecting the sale after the earlier date of sale was not adherered to in the SARFAESI Act. In such circumstances going by the prescription contained in Section 37 of the SARFAESI Act, as we have reached a conclusion that the provision contained in Section 29 of the RDDB Act will be in addition to and not in derogation of the provisions of the SARFAESI Act, the provisions contained in Rule 15, which is applicable by virtue of the stipulation contained in Section 29 of the RDDB Act, whatever stated in sub-rule (2) of Rule 15 should be followed in a situation where a notice of sale notified as per Rules 8 and 9(1) of the Securitisation Trust Rules, read along with Section 13(8) gets postponed. In our considered view such a construction of the provisions, namely, Sections 37, 13(8) and 37 of the SARFAESI Act, read along with Section 29 with the aid of Rule 15 could alone be made and in no other manner.
53. We, therefore, hold that unless and until a clear 30 days notice is given to the borrower, no sale or transfer can be resorted to by a SECURED CREDITOR. 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 that respect, the only other provision to be noted is sub-rule (8) of Rule 8 as per which sale by any method other than public auction or public tender can be on such terms as may be settled between the parties in writing. As far as sub-rule (8) is concerned, the parties referred to can only relate to the SECURED CREDITOR and the borrower. It is, therefore, imperative that for the sale to be effected under Section 13(8), the procedure prescribed under Rule 8 read along with 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 Section 13(1) and (8) of the said Act.
54. Having pronounced the legal position as above, when we refer to the facts of the present case, the initial sale was notified to take place on 25.09.2007. The paper publication was made on 23.08.2007. Therefore, applying Rule 9(1) read along with the proviso to sub-rule (6) of Rule 8, there can be no quarrel as to the procedure followed in effecting the publication for resorting to sale on 25.09.2007. When it comes to the question of the intimation to the borrower as required under sub-rule (6) of Rule 8, we find that admittedly Respondents 1 and 2 were informed by the 4th Respondent-Bank only on 30.08.2007. Therefore, as the sale date was 25.09.2007 it did not fulfill the mandatory requirement of 30 clear days notice to the borrower as stipulated under sub-rule (6) of Rule 8. In fact, on this score itself it can be held that if the sale had been effected on 25.09.2007, it would not have been in accordance with Section 13(8) of the SARFAESI Act, read along with Rules 8 and 9(1). But at the intervention of the Court, namely, the orders passed in Writ Petition 27182 of 2007 dated 20.09.2007, the sale date fixed on 25.09.2007 was adjourned by six weeks. In any case, the sale was not effected even after the six weeks period expired as directed in the said Order dated 20.09.2007. The Securitisation Application No. 20 of 2007, came to be disposed of by the DRT only on 27.12.2007.
55. Therefore, once the Securitisation Application of the borrowers, namely, Respondents 1 and 2 was dismissed on 27.12.2007, even assuming that there was no impediment for the SECURED CREDITOR, namely, the 4th Respondent-Bank to resort to sale under the provisions of the SARFAESI Act, as held by us in the earlier paragraphs, there should have been a fresh notice issued in accordance with Rules 8(6) and 9(1) of the Rules, 2002. Unfortunately, the 4th Respondent-Bank stated to have effected the sale on 28.12.2007 by accepting the tender of the Appellant and by way of further process, directed the Appellant to deposit the 25% of the amount on that very day and also directed to deposit the balance amount within 15 days, which was deposited by the Appellant on 11.01.2008. In fact, after the deposit of the 25% of the amount on 28.12.2007, the 4thRespondent-Bank stated to have confirmed the sale in favour of the Appellant on 31.12.2007. After the deposit of the balance amount on 11.01.2008 by communication dated 02.02.2008, the 4th Respondent-Bank informed the 1st and 2nd Respondents about the confirmation of sale and thereby, provided no scope for Respondents 1 and 2 to tender the dues of the SECURED CREDITOR, namely, the 4th Respondent-Bank with all charges, expenses etc., as has been provided under Section 13(8) of the SARFAESI Act. Therefore, the whole procedure followed by the 4th Respondent-Bank in effecting the sale on 28.12.2007 and the ultimate confirmation of the sale on 11.01.2008, stood vitiated as the same was not in conformity with the provisions of the SARFAESI Act and the Rules framed thereunder. Though, such a detailed consideration of the legal issues was not made by the Division Bench while setting aside the sale effected in favour of the Appellant, having regard to the construction of the provisions of the SARFAESI Act, the RDDB Act and the relevant Rules, we are convinced that the Judgment of the Division Bench dated 08.03.2010, passed in Writ Appeal 1555 of 2009, was perfectly justified and we do not find any infirmity with the same.”
12. With regard to 30 days' clear notice, Shri. M.M. Sahai has also placed reliance on a Division Bench judgement of this Court in Dayanath Pandey v. State of UP through its Secretary, Allahabad Bank, Branch Civil Lines 2008 (2) AWC 1255 in which it was held in paras 4 and 5 as under:—
“4. Annexure-2 to the writ petition is notice under Section 13(2) of the Act. This was dated 9.7.2007. Admittedly, this was served on the petitioner on 13.7.2007. Another notice dated 13.9.2007 was sent to the petitioner under Section 13(4) of the Act read with Rule 6(2) and Rule 8(6) of The Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the Rules). After giving notice under Section 13(2) of the Act, possession of house of the petitioner was taken by the Bank on 10.9.2007. The period of sixty days given in the notice under Section 13(2) of the Act was to be counted from the date of notice and not from the date of service. However, this fact was not material in the present case because notice under Section 13(2) of the Act was issued on 9.7.2007 and same was served on the petitioner on 13.7.2007 and possession was taken on 10.9.2007, meaning thereby, possession was taken after sixty days of issuance of notice. The notice under Section 13(4) of the Act was dated 13.9.2007 and the house of the petitioner was put to auction on 12.10.2007. As required under Rule 6(2) and 8(6) of the Rules, a clear period of thirty days was to be given to the petitioner for paying dues. This fact was mentioned in the notice under Section 13(4) of the Act. In pursuance to that notice, sale proclamation was issued in the news paper ‘Amar Ujala’ on 13.9.2007, copy of which is paper No. 35 in the application dated 5.2.2008, which is part of affidavit of Sri. M.S. Saroha, Assistant General Manager of respondent No. 2. This publication shows that notice was published on 13.9.2007 and date fixed for sale was 12.10.2007, meaning thereby date for sale was fixed on 29th day from the date of publication, which was clearly against the law. Admittedly, sale was made on 12.10.2007 and it was confirmed on the next day i.e on 13.10.2007, that was also illegal because clear period of thirty days from the date of notice was to be given to the petitioner for making payment as required by the law, but unfortunately entire sale proceedings were finished within thirty days of publication of the notice. The computation of period of notice had to be made under the provisions of Section 9 of U.P. General Clauses Act, 1904 which runs as under: Section 9. Commencement and termination of time-In any (Uttar Pradesh) Act it shall be sufficient, for the purpose of excluding the first in a series of days or any other period of time, to use the word “from” and for the purpose of including the last in a series of days or any other period of time, to use the word “to”.
5. Thus, the period of thirty or sixty days was to be counted excluding the date of issuance of notice. Admittedly, the sale certificate was issued on 26.10.2007 and sale deed was executed on 5.11.2007 in favour of the respondent No. 3, in spite of order dated 30.10.2007. The entire sale proceedings were illegal. This was prima-facie disobedience of order of the Court.”
13. On the other hand, Shri. Sanjai Singh, learned counsel appearing for the respondents-bank submitted that the housing loan account of the petitioner was running irregular. The respondent bank had sent several letters and reminders to the petitioner with request to regularize the account. Thereafter the bank held a personal meeting with the petitioner but all in vain. Despite the various demand notices from the bank, the petitioner failed to repay the debts and instalments due and the account of the petitioner in respect of such debts were classified by the bank as ‘NPA’ on 30.9.2010. Thereafter the bank issued a demand notice dated 3.11.2010 and sent to the petitioner through registered post. After expiry of sixty days' period when the petitioner did not liquidate the dues of the bank, the bank had issued possession notice dated 4.2.2011 which was also served on the petitioner through registered post and also by affixing the possession notices on the outer door of the property. The bank obtained a valuation report from the registered valuer of the bank and thereafter the bank published the sale notice on 19.11.2011 in two newspapers and being the creditor sold the security and issued sale certificate dated 28.12.2011 in favour of the purchaser-fourth respondent. The Authorized Officer of the bank had executed sale deed on 6.11.2011. The mutation proceeding has also been completed and the name of the auction purchaser is mentioned in the revenue record. The Bank had given ample opportunity to the petitioner at every stage to repay the dues of the bank but he deliberately did not pay the same. The action of the bank is in accordance with the provisions contained in SARFAESI Act and the bank has followed each and every procedure of the SARFAESI Act. The Appellate Tribunal has applied it judicious mind and decided the appeal filed by the petitioner strictly in accordance with law and the writ petition is liable to be dismissed.
14. Shri. Sanjay Rai, Advocate holding brief of Shri. B.N. Rai, learned counsel appearing for auction purchaser i.e. fourth respondent submitted that the petitioner had knowledge of the publication in the newspaper under Section 13(2) of SARFAESI Act, notice under Rules 6, 8 and 9 of the 2002 Rules as well as the possession notice under Section 13(4) of the SARFAESI Act. The petitioner was dismissed from the bank and he was not entitled for any amount as alleged by the bank. The fourth respondent purchased the property in question in the auction for a sum of Rs. 8,10,351/- and the auction has been confirmed in favour of the fourth respondent. Thereafter the registered sale deed was executed in favour of the fourth respondent on 6.1.2012. The petitioner is in illegal occupation of the property in question and the writ petition against concurrent finding of fact by both the courts below is not maintainable and is liable to be dismissed with cost.
15. I have considered the submissions advanced by the learned counsel for the parties.
16. In the present matter, much emphasis has been given by the bank on the demand notice dated 13.10.2010 at page-127 of the paper book wherein it has been mentioned that the account of the petitioner has become irregular due to suspension/termination of service. Record clearly reflects that the services of the petitioner had not been terminated and he was actually compulsorily retired from service. It has also been brought on record that at the time of suspension i.e. 3.8.2008 the petitioner was receiving gross salary to the tune of Rs. 30,000/- per month and under the relevant banking service rules he was definitely entitled half of the salary as subsistence allowance for initial six months and thereafter it goes upto two-third of the gross salary. It has also been claimed that for the first six months the petitioner was entitled to receive Rs. 15,000/- as subsistence allowance per month and thereafter for Rs. 20,000/- per month. The statement of salary accounts, which has been brought on record, clearly indicates that for the said period the subsistence allowance was not paid to the petitioner in the regular manner creating deficiency in his account and moreover, after the order of compulsory retirement, he was definitely entitled for pension and other service benefits. In this backdrop, it has been claimed that the aforesaid amount was shown to meet out the deficiency in the loan account.
17. It has also been urged that the bank has deliberately not paid the subsistence allowance causing deliberate financial hardship to the petitioner. The Chief Manager of the respondent bank had written on 16.8.2011 that an amount of Rs. 3,51,038.77 was received by the branch towards provident fund out of which a sum of Rs. 2,24,586.53 was credited on 31.3.2010 for adjustment of outstanding amount of Rs. 2,37,443/-. In this backdrop it has been stated that under the aforementioned circumstances there could not have been any possibility of default or classification of account as non-performing asset. It has also been claimed that it is not the case where the debtor has committed any default. The same was artificially created by the bank under which the debtor was bound to commit default. Once admittedly the amount in question had been with the bank, then by no stretch of imagination the account could be declared as non-performing asset. Even at the time of declaration of NPA, the amount of subsistence allowance was due to be paid by the bank which was not credited in the account of the petitioner. As a matter of fact, the notice was not served on the petitioner. It has also been urged that the Tribunal has failed to consider the fact that the property was under valued by the respondent bank and in the entire city of Varanasi such amount having measurement cannot be purchased at such rate.
18.Undoubtedly, public money should be recovered and recovery should be made expeditiously, but it does not mean that the financial institutions, which are concerned only with the recovery of their loans, may be permitted to behave like property dealers and be permitted further to dispose of the secured assets in any unreasonable or arbitrary manner in flagrant violation of statutory provisions.
19. In Lachhman Dass v. Jagat Ram(2007) 10 SCC 448, the Hon'ble Supreme Court held that a right to hold property is a constitutional right as well as a human right. A person cannot be deprived of his property except in accordance with the provisions of statute. Similar view has been reiterated by the Apex Court inChairman, Indore Vikas Pradhikaran v. Pure Industrial Coke & Chemicals Ltd. AIR 2007 SC 2458; and Commissioner of Municipal Corporation, Shimla v. Prem Lata Sood(2007) 11 SCC 40. Thus the condition precedent for taking away someone's property or disposing of the secured assets, is that the authority must ensure compliance of the statutory provisions. In case the property is disposed of by private treaty without adopting any other mode provided under the aforesaid rules, there may be a possibility of collusion/fraud and even when public auction is held, the possibility of collusion among the bidders cannot be ruled out.
20.In State of Orissa v. Harinarayan Jaiswal  3 SCR 784, the Apex Court held that a highest bidder in public auction cannot have a right to get the property or any privilege, unless the authority confirms the auction sale, being fully satisfied that the property has fetched the appropriate price and there has been no collusion between the bidders. In Haryana Financial Corporation v. Jagdamba Oil Mills  1 SCR 621, the Hon'ble Supreme Court consider this aspect and while placing reliance upon its earlier Judgment in Chairman and Managing Director, SPICOT v. Contromix (P) Ltd.AIR 1995 SC 1632 held as under:—
“In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price. But many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature of the property to be sold is such that suitable bid may not be received at a public auction. In that event, any other suitable mode for selling of property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is essential that every endeavour should be made to give wide publicity so as to get the maximum price.”
21. Therefore, it becomes an legal obligation on the part of the authority that property be sold in such a manner that it may fetch the best price. Thus essential ingredients of such sale remain a correct valuation report and fixing the reserve price. In case proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report the intending buyers may not come forward treating the property as not worth purchase by them. As a moneyed person or a big businessman may not like to involve himself in small sales/deals.
22. The word ‘value’ means intrinsic worth or cost or price for sale of a thing/property, (vide Union of India v. Bombay Tyre International Ltd.(1984) 1 SCC 467; and Gurbachan Singh v. Shivalak Rubber Industries  2 SCR 997. In State of U.P. v. Shiv Charan Sharma AIR 1981 SC 1722, the Supreme Court explained the meaning of ‘reserve price’ explaining that the price with which the public auction starts and the auction bidders are not permitted to give bids below the said price, i.e. the minimum bid at auction.
23. In Anil Kumar Srivastava v. State of U.P. AIR 2004 SC 4299, the Hon'ble Apex Court considered the scope of fixing the reserve price and placing reliance on its earlier Judgment in Duncans Industries Ltd. v. State of U.P. 2000 ECR 19 (SC), explained that reserve price limits the authority of the auctioneer. The concept of the reserve price is not synonymous with valuation of the property. These two terms operate in different spheres. An invitation to tender is not an offer. It is an attempt to ascertain whether an offer can be obtained with a margin. The valuation is a question of fact, it should be fixed on relevant material. The difference between the ‘valuation’ and ‘reserve price’ is that, fixation of an upset price may be an indication of the probable price which the property may fetch from the point of view of intending bidders. Fixation of the reserve price does not preclude the claimant from adducing proof that the land had been sold for a low price.
24. In view of the above, it is evident that there must be application of mind by the authority concerned while approving/accepting the report of the approved valuer and fixing the reserve price, as the failure to do so may cause substantial injury to the borrower/guarantor and that would amount to material irregularity and ultimately vitiate the subsequent proceedings.
25. In order to examine the correctness of the impugned orders, a serious look into Section 13 in particular sub-section (8) of the SARFAESI Act along with Rules 8 and 9 of the Rules, 2002 is required. I, therefore, deem it appropriate to extract Sections 2(zc), 2(zf), 13(1) and (8) of the SARFAESI Act, as well as Rule 8 sub-rules (1), (3), (5) and (6) and also Rule 9(1) which are as under:—
“2(zc) “secured asset” means the property on which security interest is created;
2(zf) “security interest” means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31;
13. Enforcement of security interest.-(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
(8). If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.
Rule 8. Sale of immovable secured assets.(1) Where the secured asset is an immovable property, the authorised 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.
(3) In the event of possession of immovable property is actually taken by the authorised officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property.
(5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:—
(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or
(b) by inviting tenders from the public;
(c) by holding public auction; or
(d) by private treaty.
(6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5):
Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,—
(a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;
(b) the secured debt for recovery of which the property is to be sold;
(c) reserve price, below which the property may not be sold;
(d) time and place of public auction or the time after which sale by any other mode shall be completed;
(e) depositing earnest money as may be stipulated by the secured creditor;
(f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property.
Rule 9. Time of sale, issue of sale certificate and delivery of possession, etc.—
(1) No sale of immovable property under these rules shall 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.
26. Under Section 13(1), it is provided that any security interest created in favour of the secured creditor may be enforced without the intervention of the Court and Tribunal by such creditor in accordance with the provisions of this Act. The nonobstante clause in the opening set of expressions contained in Section 13(1), as pointed out by Shri. M.M. Sahai, learned counsel for the borrowers, is restricted to Section 69 or Section 69A of the T.P. Act. Apart from noting the said statutory impediment, to be noted in Section 13(1), the more important feature to be noted is that a free hand is given to the secured creditor for the purpose of enforcing any security interest created in favour of secured creditor, without the intervention of the Court or Tribunal. The only other relevant aspect contained in the said sub-section is that such enforcement should be in accordance with the provisions of this Act. A reading of Section 13(1), therefore, is clear to the effect that while on the one hand any secured creditor may be entitled to enforce the secured asset created in its favour on its own without resorting to any court proceedings or approaching the Tribunal, such enforcement should be in conformity with the other provisions of the SARFAESI Act.
27. Keeping the said stipulation contained in Section 13(1) in mind, it will have to be examined as to what are the other statutory requirements to be fulfilled when enforcement of a right created in favour of any secured creditor in respect of a security interest is created. As the Court is concerned with the sale of property mortgaged by the borrowers, for the present I leave aside any other form or mode of enforcement, except the one relating to the equitable mortgage created in favour of the Bank. For that purpose, I find that sub-section (8) of Section 13 would be relevant. A careful reading of sub-section (8), therefore, has to be made to appreciate the legal issue involved and the submissions made by the respective counsel on the said provision.
28. A plain reading of sub-section (8) would show that a borrower can tender to the secured creditor the dues together with all costs, charges and expenses incurred by the secured creditor at any time before the date fixed for sale or transfer. In the event of such tender once made as stipulated in the said provision, the mandate is that the secured asset should not be sold or transferred by the secured creditor. It is further reinforced to the effect that no further step should also be taken by the secured creditor for transfer or sale of the secured asset. The contingency stipulated in the event of the tender being made by a debtor of the dues inclusive of the costs, charges, etc., would be that such tender being made before the date fixed for sale or transfer, the secured creditor should stop all further steps for effecting the sale or transfer. That apart, no further step should also be taken for transfer or sale. When I analyze in depth the stipulations contained in the said sub-section (8), I find that there is a valuable right recognized and asserted in favour of the borrower, who is the owner of the secured asset and who is extended an opportunity to take all efforts to stop the sale or transfer till the last minute before which the said sale or transfer is to be effected. Having regard to such a valuable right of a debtor having been embedded in the said sub-section, it will have to be stated in uncontroverted terms that the said provision has been engrafted in the SARFAESI Act primarily with a view to protect the rights of a borrower, inasmuch as, such an ownership right is a Constitutional Right protected under Article 300A of the Constitution, which mandates that no person shall be deprived of his property save by authority of law. Therefore, de hors, the extent of borrowing made and whatever costs, charges were incurred by the secured creditor in respect of such borrowings, when it comes to the question of realizing the dues by bringing the property entrusted with the secured creditor for sale to realize money advanced without approaching any Court or Tribunal, the secured creditor as a Trustee cannot deal with the said property in any manner it likes and can be disposed of only in the manner prescribed in the SARFAESI Act. Therefore, the creditor should ensure that the borrower was clearly put on notice of the date and time by which either the sale or transfer will be effected in order to provide the required opportunity to the borrower to take all possible steps for retrieving his property or at least ensure that in the process of sale the secured asset derives the maximum benefit and the secured creditor or anyone on its behalf is not allowed to exploit the situation of the borrower by virtue of the proceedings initiated under the SARFAESI Act. More so, under Section 13(1) of the SARFAESI Act, the secured creditor is given a free hand to resort to sale of the property without approaching the Court or Tribunal.
29. 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.
30. 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 followed by a secured creditor while resorting to a sale after the issuance of the proceedings under Section 13(1) to (4) of the SARFAESI Act. 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 sub-rule (6) of Rule 8 or notice of sale has been served to the borrower. Sub-rule (6) of Rule 8 again states that the authorized officer should serve to the borrower a notice of 30 days for the sale of the immovable secured asset. Reading sub-rule (6) of Rule 8 and sub-rule (1) of Rule 9 together, the service of individual notice to the borrower, specifying clear 30 days time gap 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 other words, while the publication in newspaper should provide for 30 days clear notice, since Rule 9(1) also states that such notice of sale is to be in accordance with proviso to sub-rule (6) of Rule 8, 30 days clear notice to the borrower should also be ensured as stipulated under Rule 8(6) as well. Therefore, the use of the expression ‘or’ in Rule 9(1) should be read as ‘and’ as that alone would be in consonance with Section 13(8) of the SARFAESI Act.
31. At this juncture, it will also be worthwhile to refer to Rules 8(1) to (3) and in particular sub-rule (3), in order to note the responsibility of the secured creditor vis-a-vis the secured asset taken possession of. Under sub-rule (1) of Rule 8, the prescribed manner in which the possession is to be taken by issuing the notice in the format in which such notice of possession is to be issued to the borrower is stipulated. Under sub-rule (2) of Rule 8 again, it is stated as to how the secured creditor should publish the notice of possession as prescribed under sub-rule (1) to be made in two leading newspapers, one of which should be in the vernacular language having sufficient circulation in the locality and also such publication should have been made seven days prior to the intention of taking possession. Sub-rule (3) of Rule 8 really casts much more onerous responsibility on the secured creditor once possession is actually taken by its authorised officer. Under sub-rule (3) of Rule 8, the property taken possession of by the secured creditor should be kept in its custody or in the custody of a person authorized or appointed by it and it is stipulated that such person holding possession should take as much care of the property in its custody as a owner of ordinary prudence would under similar circumstances take care of such property. The underlining purport of such a requirement is to ensure that under no circumstances, the rights of the owner till such right is transferred in the manner known to law is infringed. Merely because the provisions of the SARFAESI Act and the Rules enable the secured creditor to take possession of such an immovable property belonging to the owner and also empowers to deal with it by way of sale or transfer for the purpose of realizing the secured debt of the borrower, it does not mean that such wide power can be exercised arbitrarily or whimsically to the utter disadvantage of the borrower.
32. In the present matter the notice was published on 19.11.2011 and date was fixed for auction sale on 18.12.2011. Meaning thereby the clear 30 days' has not been provided in the matter. In Dayanath Pandey's case it was held that the period of thirty or sixty days was to be counted excluding the date of issuance of notice.
33. In Navalkha and Sons v. Sri. Ramanya Das AIR 1970 SC 2037 the Apex Court while dealing with the confirmation of sale by Court held that there must be a proper valuation report, which should be communicated to the judgment debtor and he should file his own valuation report and the sale should be conducted in accordance with law and after confirmation of sale and issuance of sale certificate, Court cannot interfere unless it is found that some material irregularity in the conduct of sale has been committed. The Court further held that it should not be a forced sale. A valuer's report should be as good as the actual offer and the variation should be within limit. Such estimate should be done carefully and bids by the seasoned auctioneer. The Court further held as under:—
“The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion.”
34. A similar view has been reiterated by the Hon'ble Apex Court, following the said Judgment, in Kayjay Industries (P) Ltd. v. Asnew Drums (P) Ltd. 1974 3 SCR 678.
35. Writ jurisdiction is discretionary in nature and must be exercised in furtherance of justice. The Court has to keep in mind that its order should not defeat the interest of justice nor it should permit an order to secure dishonest advantage or perpetuate an unjust gain or approve an order which has been passed in contravention of the statutory provisions, (vide Champalal Binani v. CIT, West Bengal 76 ITR 692 (SC); M.P. Mittal v. State of Haryana 1985 (1) SCR 940; State of U.P.v. U.P. State Law Officers Association: 1994 (1) SCR 348; Dr. Arundhati A. Pargaonkarv. State of Maharashtra: (1995) I LLJ 927 SC; Chandra Singh v. State of Rajasthan AIR 2003 SC 2889; ONGC Ltd. v. Sendhabhai Vastram Patel(2005) 6 SCC 454; and K.D. Sharma v. Steel Authority of India Ltd. AIR 2008 SCW 6654).
36. In Andhra Pradesh State Financial Corporation v. GAR Re-Rolling Mills (1994) 1 SCR 857, the Apex Court held as under:
“A Court of equity, when exercising its equitable jurisdiction under Article 226 of the Constitution must so act as to prevent perpetration of a legal fraud and the Courts are obliged to do justice by promotion of good faith, as far as it lies within their power. Equity is always known to defend the law from crafty evasions and new subtleties invented to evade law.”
37. In Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai 2004 (176) ELT 24 (SC), the Apex Court observed that Courts are concerned with substantial justice and prevent to perpetuate grave injustice to parties and whenever the order is one which shocks the conscience of the Court or suffers on account of disregard to the form of legal process or with violation of the principles of natural justice by the statutory provisions the Court would interfere. The Court ‘would never do injustice nor allow injustice being perpetuated just in the sake of upholding technicalities’.
38. Similarly, a Constitution Bench of the Supreme Court in Sukhdev Singh v.Bhagatram Sardar Singh Raghuvanshi (1975) I LLJ 399 SC, has observed as under:
“The statutory authorities cannot deviate from the conditions of service. Any deviation will be enforced by legal sanction of declaration by Courts to invalidate actions in violation-of rules and regulations…. In cases of statutory bodies there is no personal element whatsoever because of the impersonal character of statutory bodies…. This Court has repeatedly observed that whenever a man's rights are affected by decision taken under statutory-powers; the Court would presume the existence of a duty to observe the rules of natural justice and compliance with rules and regulations imposed by statute.”
39. In Seth Kashi Ram Chemical (India) v. State of Haryana AIR 1991 SC 478 the Apex Court held that highest bidder may be entitled for refund of the amount offered and deposited by him with interest by the Judgment debtor. He cannot claim the right to get the property if there had been a compromise between the Judgment debtor and the secured creditor after the auction sale.
40. Non-compliance of such a mandatory requirement vitiated the proceedings. The Tribunal and the DRAT have dealt with various issues without touching the most material issues involved in this case as explained hereinabove. The Tribunal and DRAT have mis-directed themselves without entering into the legal issues, particularly the requirement and compliance of statutory provisions as non compliance thereof would vitiate the entire proceedings.
41. Non-compliance of statutory requirements of publication of possession notice and auction notice in vernacular language rendered the statutory requirement as farce. There should be purposeful compliance of the provisions of law and it cannot be reduced to an empty formality. The requirement to cause publication in ‘vernacular language’ in the newspaper is fundamental and the statutory requirement which cannot be compromised. It is not for the borrower or guarantor to establish that non-publication of the said notices in -‘vernacular language’ in the newspaper has caused any prejudice to its cause. It is for the Respondents to establish that non compliance of the statutory requirements has not caused any prejudice at all.
42. In view of the above, both the writ petitions succeed and are allowed. All proceedings subsequent to notice under Section 13(4) of the Act, 2002 being in flagrant violation of the statutory provisions are liable to be quashed. The case is squarely covered by the judgments of the Apex Court referred to above, wherein the Apex Court held that not following the statutory provisions itself is a good ground for quashing the confirmed sale. In such a fact situation the fourth respondent is entitled to refund of the amount deposited by her. The respondent bank shall refund the amount deposited by the fourth respondent with interest @ 10% per annum to her within four weeks from today. The respondent bank is directed to recalculate the amount due from the petitioner including interest thereon and issue a fresh demand notice to be served upon the petitioner within four weeks from today. The Court further direct that as the respondent bank proceeded illegally, it is not entitled to claim for legal expenses or recovery expenses from the petitioner. On receipt of the recomputed demand from the bank, the petitioner shall deposit the same within four weeks from the date of receipt failing which the bank shall be at liberty to proceed against the petitioner for making full recovery of its outstanding dues in accordance with law.