Dr. N.V. Badarinath, (Presiding Officer)

1. The applicants have assailed the sale of the application schedule mentioned property held on 26.10.2018 pursuant to the sale notice dated 5.10.2018 issued by the first respondent, inter alia, contending that the same is not in conformity with the mandatory provisions of the SARFAESI Act and the Rules made thereunder and prayed the Tribunal, to set aside the said sale and all the consequential acts of the 1st respondent.

2. The gist of the case of the applicants is that the first Applicant is the borrower and the second and third applicants have mortgaged their properties more fully described in the schedule of this application for the loans availed by the first applicant.

2.1. It is stated that in the course of business Karnataka Bank Ltd., Thambu Chetty Street, Sanctioned O.D. to the tune of Rs. 20,00,00,000/- and a Term Loan to the tune of Rs. 11,35,00,000/- to the first applicant and the first applicant was servicing the above mentioned credit facilities without delay or default but due to the slump in business, change in government policies and stringent market situation the applicants were unable to regularly service the loan.

2.2. It is stated that the authorized officer, Karnataka Bank issued a demand notice dated 26-05-2016 claiming a sum of Rs. 31,60,26,599.01/- due as on 25-05-2016. In the above said demand notice the authorized officer allegedly claimed the account has been classified as N.P.A. since 31-03-2016. By the said demand notice the authorized officer threatened that he would enforce the security and take measures under the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002, if the applicants did not comply with the demand within 60 days.

2.3. It is stated that the said notice was issued in contravention of section 13(3) of the SARFAESI Act. It is stated that as per section 13(3), the notice referred to in section 13(2) is required to set out details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. However, in the present notice no such details of the amount payable giving details as to disbursement, repayment and outstanding have been mentioned rather only a consolidated figure of Rs. 31,60,26,599.01p without any relevant breakup is mentioned. It is also stated that the above mentioned consolidated figure of Rs. 31,60,26,599.01p never meets the requirement of section 13(3) of the SARFAESI Act. Therefore, the said notice is not in compliance with the provisions of the SARFAESI Act itself. Moreover, in the demand notice there is no whisper about registering the security interest created by the borrower with the Central Registry which is a pre-condition for invoking the provisions of Chapter III of the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002.

2.4. It is stated that in the demand notice that in default of payment, bank would be constrained to exercise its right of enforcement of the alleged security. It is stated that on 24-01-2017 the applicants received a possession notice dated 19-01-2017 from the respondent. Challenging the said possession notice, the applicants filed S.A. No. 44 of 2017 before the Hon'ble DRT -2 Chennai and DRT-2 Chennai granted a conditional stay but due to the financial difficulties the applicants were unable to comply with the same.

2.5. It is stated that in the meantime, vide letter dated 13-04-2017 the vice president of ASREC (India) Limited intimated the applicants that their loan account was acquired from Karnataka Bank on 27-03-2017 under the provisions of SARFAESI Act 2002. Later on in S.A. No. 44 of 2017 the 1st respondent was substituted in the place of Karnataka Bank and the said S.A. No. 44 of 2017 was dismissed by the Hon'ble DRT -2 Chennai vide order dated 13th July 2018. In the said order the Hon'ble DRT -2 Chennai has held that "The Registration by the secured creditor with the Central Registry is not mandatory to proceed under the SARFAESI Act by the secured creditor and also there is no bar to proceed. It is the minor dispute between the secured creditor and the central registry. That mistake may be rectified in future. Further, the alleged non registration is never given any prejudice or hardship to the borrower. Hence I find the objection regarding the registration of secured asset with the Central Registry is unsustainable".

2.6. It is stated that after the receipt of letter dated 18-04-2018 from the 1st respondent the applicants were in constant touch with the said respondent and in fact the applicants also had identified a person who was ready to pay the dues of the 1st respondent and purchase the property for a distress value of Rs. 55 Crores. It is stated that the respondent filed O.A. No. 179 of 2018 before the Hon'ble DRT -1 Chennai. It is stated pending discussion for a one time settlement, the respondent issued sale notice dated 02-08-2018 fixing the reserve price of the property at Rs. 25 Crores. It is stated that even while the Guideline value is above Rs. 29 Crores the respondent had grossly undervalued property, which is worth much more. When the applicants' investor knew about the reserve price fixed at Rs. 25 Crores, he got confused about the pricing and withdrew from the process of buying the property from the applicants for reasons best known to him.

2.7. It is stated that the 3rd respondent intimated the applicants that the sale notified pursuant to the sale notice dated 02-08-2018 did not take place hence advised the applicants to make arrangements to pay the dues and take back the property. In the meantime there was some change in the officials in the 3rd respondent office and they issued yet another sale notice dated 05-10-2018 fixing the date of sale on 26-10-2018 the said sale notice was enclosed in a letter dated 08-10-2018 and communicated to the applicants. It is stated that the reserve price was unilaterally reduced from Rs. 25 Crores to Rs. 21 Crores. The applicants were in constant touch with the 3rd respondent and it was assured that it is just a routine formality and they do not have buyers to sell the property on 26-10-2018. The applicants were advised not to file S.A. before DRT as the same would spoil the relationship and there would be no possibility of settlement. Moreover on several occasions even subsequent to 26-10-2018 the applicants were encouraged by the respondent to come with an investor to pay the dues and take back their property.

2.8. It is stated that the second applicant was taking care of the affairs of the 1st applicant had an accidental fall on 28-09-2018 which affected his spinal cord and was advised bed rest for speedy and better recovery. Hence the applicant due to his health reasons was unable to either mobilize funds or identify investor or purchaser to settle the dues of the 1st respondent.

2.9. It is stated that only when the respondent filed a part satisfaction memo dated 02-01-2019 in O.A. No. 179 of 2018 the applicant came to know that the property was sold. The reserve price without any justification was reduced. It is stated that due to his ill health he was unable to meet his advocate only on 17-01-2019 and immediately on 19-01-2018 the applicant wrote to the respondent seeking details about the purchaser and also that the property was sold for paltry sum. It is stated that in reply to the letter dated 19-01-2019 the respondent sent a reply along with sale certificate dated 24-12-2018 and the valuation dated 09-07-2018 based on which the sale took place on 26-10-2018. A bare perusal of the sale certificate would reveal that the purchaser failed to pay the sale consideration within the time stipulated.

2.10. It is stated that in another sale concluded under the SARFAESI Act, by Canara Bank vide document No. 540 of 2019 dated 25-01-2019 the said bank has sold a property an extent of 450.50 cents (equivalent to 196418 Sq.ft.) in the same locality being Inner Ring Road, Madhavaram, Chennai - 600060, with same guideline value in a much interior locality at Rs. 55,60,00,000/- the price per Square feet as per the No. 540 of 2019 works out to Rs. 2830.70/- whereas the respondent has sold the applicants property for pitons. An extent of 123710.4 sq.ft of applicants property has been sold by the 1st respondent to the 2nd respondent for Rs. 21,01,00,000/-, the price as per the sale certificate works out to Rs. 1,705.60/- for one Square feet while the prevailing Guideline Value is Rs. 2345/- per Square Feet and the market value is much more. This be so Canara Bank during the same period in the same locality has sold a property with an extent of 450.50 cents (equivalent to 196418 Sq.ft.) at Rs. 55,60,00,000/- and as per the above sale deed the value of one Square Feet works out to Rs. 2830.70/-

2.11. It is stated that the 1st respondent failed to give publication about the sale to be held on 26-10-2018 in leading newspapers having wide circulation and the same could be inferred as the 2nd respondent is a single bidder in the sale conducted by 1st respondent and the reserve price has been fixed with a scheme to facilitate the 2nd respondent to purchase the property for paltry sum.

2.12. In the grounds of the application, it is stated that there is no enabling provision for the secured creditor to invoke the provisions under chapter III of the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 unless the security interest is registered with the Central Registry under section 26 of the said act. In the present case the security interest has not been registered with the Central registry. It is stated that the authorized officer ought to have seen that the secured creditor by virtue of section 26-D is a barred from proceeding under provisions of the act unless the security interest is registered with the Central Registry and the same vitiates the entire recovery proceedings consequentially the impugned sale held on 26-10-2018 based on the sale notice dated 05-10-2018 is liable to be set aside. It is stated that the authorized officer has not issued publication about the sale to be held on 26-10-2018 in leading newspapers having wide circulation and the same was with a sole intention to facilitate the 2nd respondent the sole bidder to knock away the property. It is stated that the authorized officer had relied upon the valuation dated 09-07-2018 for the sale held on 26-10-2018 based on the sale notice dated 05-10-2018. It is stated that it was a second sale notice and the authorized officer has issued sale notice and concluded the sale on 26-10-2018 without obtaining fresh valuation for the said sale. Hence the sale held on 26-10-2018 in favour of the 2nd respondent is liable to be set aside. It is stated that the reserve price has been arrived and fixed without any proper valuation for reasons best known to the 1st respondent. It is stated that the first respondent had grossly undervalued the applicants property and sold it to the 2nd respondent which could in no way be condoned and the sale held on 26-10-2018 is liable to be set aside. It is stated that a perusal of the sale certificate would reveal that the 2nd respondent had not made the payments as per the payment schedule mentioned in the terms and condition of the sale notice dated 05-10-2018. Hence the same is in violation of the terms and condition of the sale and is liable to be set aside. It is stated that had the authorized officer mentioned in the terms of the sale notice that the terms of payments can be relaxed in the sale conditions the number of participants would have increased and the property could have fetched higher value. Any variation in the terms of the sale would vitiate the sale hence the sale held on 26-10-2018 is liable to be set aside. Thus, contending Ld. Counsel for the applicants prayed the Tribunal to set aside and quash the entire proceedings initiated by the 1stRespondent including the action under section 13(4) of the SARFAESI Act, more particularly the sale held on 26-10-2018 based on the sale notice dated 05-10-2018 and consequentially restore possession and to award the costs of this application and to grant compensation-under section 19 of the act and such other relief's as this Hon'ble Tribunal may deem fit and proper in the circumstances of the case and thus render justice.

2.13. Ld. Counsel for the applicants relied upon the following documents in support of his case.

a) Demand Notice dated 26.5.2016

b) possession notice dated 19.1.2017

c) S.A. No. 44 of 2017 on the file of DRT-2 Chennai dated 4.3.2017

d) Letter from 1st Respondent dated 13.4.2017

e) Letter from 1st Respondent dated 17.4.2017

f) Final Order in S.A. No. 44 of 2017 dated 13.7.2018

g) Copy of the Valuation sent by the 1strespondent along with the letter dated 22-01-2019 dated 9.7.2018

h) Sale notice issued by the 1st respondent dated 2.8.2018

i) Medical certificate for the 2nd applicant's ailment dated 28.9.2018

j) Public Notice for auction sale issued by the 1st respondent dated 5.10.2018

k) Notice issued by the 1st respondent enclosing the notice dated 05-10-2018 dated 8.10.2018

l) Sale Certificate issued by the 1st respondent in favour of the 2nd Respondent sent by the 1strespondent along with the letter dated 22-01-2019 dated 24.12.2018

m) Part satisfaction memo filed by the 1st respondent in O.A. No. 179 of 2018 dated 2.1.2019

n) Letter issued by the 1st applicant to the 1st respondent Dated 14.1.2019

o) Reply letter issued by the 1strespondent dated 18.1.2019

p) Letter issued by the 1st applicant to the 1st respondent dated 19.1.2018

q) Reply issued by the 1st respondent along with annexure dated 22.1.2019

r) Sale Deed issued by Canara Bank vide Doc 540 of 02019 at Madhavaram Sub-registration office dated 25.1.2019

s) Letter issued by the 1st respondent dated 1.2.2019

t) Online Search result for the 2nd applicant with CERSAI dated 4.3.2019

u) Online Search result for the 3rd applicant with CERSAI dated 7.3.2019

3. In the counter affidavit The 1st Respondent stated that the above SA filed challenging the Auction Sale held on 26.10.2018 is not maintainable either in law or on facts. It is stated that all the allegations stated in the application as false, frivolous, untenable and without any basis.

3.1. It is stated that the brief facts which are germane for deciding the above SA is the applicant had availed credit facilities from Karnataka Bank to a tune of Rs. 20 Crores as Overdraft & Rs. 11.35 Crores as Term Loan in the year 2013 and since he had defaulted in repayment of the dues, the account was classified as NPA on 31.03.2016.

3.2. It is submitted that the said bank had assigned the debt in favour of the 1st Respondent being the Securitisation and asset reconstruction Company pursuant to Section 3 of the SARFAESI Act under Assignment Agreement dated 27.03.2017 which was registered as Doc. No. 4016/2017 in the office of Sub Registrar, Thirupur. It is submitted that since the Applicants continued their default, the 1st Respondent had filed OA No. 179/2018 before this Hon'ble Tribunal for recovery of sum of Rs. 41,80,13,541.85p and the same is now reserved for passing final orders. It is submitted that the 1st Respondent also proceeded under SARFAESI Act and sold the Secured Asset situated at Madhavaram to a sum of Rs. 21.01 Crores under the Public Auction Sale held on 26.10.2018 pursuant to the Sale Notice dated 05.10.2018. It is submitted that all statutory notices were received by the applicants and without challenging the same, have now sought to set aside and quash the Sale Proceedings on totally a false, frivolous, untenable and unsustainable grounds.

3.3. It is stated that the allegations made in para 2 that the account was wrongly classified as NPA and there was any threat from Karnataka Bank to enforce the security if the demand is not complied within 60 days are totally false and baseless.

3.4. It is stated that the averments made in para 3 that the Statutory Notice issued under Sec. 13(2) is in contravention of any of the provisions and that the outstanding figures mentioned is erroneous and that there is no reference to the registration of security interest with Central Registry are all denied as totally untenable and unsustainable. It is submitted that the Demand Notice issued under Sec. 13(2) of the SARFAESI Act is legally valid and contains all particulars and information as mandated under the provisions and there is no ambiguity or illegality. It is submitted that the applicants having received the statutory notice and not raised any objections have now after an advent of 3 years had raised that the said notice suffers from serious infirmities which is totally untenable and unsustainable.

3.5. It is stated that the averments made in para 4 with regard to filing of S.A. No. 44/2017 challenging the Possession Notice and subsequently the 1st Respondent was substituted in the place of Assignor Bank and the dismissal of the case on 13.07.2018 are all admitted. It is submitted that the applicants have not challenged the said Assignment and also chosen to prosecute against the 1st Respondent in the above SA. It is further submitted that the applicants also have not preferred any appeal against the said order and the same has become final and binding on the applicants.

3.6. It is stated that the averments made in para 5 that after receipt of the letter dated 18.04.2018 that the applicants were in constant touch for settling the account and that they also identified a person who was ready and willing to purchase the property at Rs. 55 Crores and that the 1st Respondent had filed the O.A. No. 179/2018 while the settlement talks were going on and that pending discussion, the 1st Respondent issued Sale Notice dated 02.08.2018 fixing the reserve price at Rs. 25.00 Crores when the Guideline value of the property was above Rs. 29.00 Crores and that the 1st Respondent had grossly undervalued the property and the so called investor got confused about the pricing and withdrew from buying are totally false, untenable and without any basis.

3.7. It is stated that when the property is offered for lesser price, it is not known why the investor backed out from purchasing the property. Further, if the alleged investor had given a letter of offer to the 1st Respondent, then this respondent would not have proceeded under the SARFAESI Act. It is submitted that in fact the Sale scheduled to be held on 10.09.2018 under Notice dated 02.08.2018 was failed due to want of bidders. Therefore, the alleged investor is a fictitious person and the applicants have never approached for settling the account and all the averments are totally false and without any basis. The allegations that the property has been grossly undervalued is also false and without any basis. It is submitted that the valuation is obtained from an approved valuer registered under the Wealth Tax Act and taking into considerations of the several factors, the upset price was fixed. It is pertinent to state that the Sale Notice dated 05.10.2018 was also served upon the applicants and they never raised any objections for the same. It is submitted that it is only when the property was sold, the applicants are desperate in somehow to set aside the sale and further frustrate and delay the recovery proceedings.

3.8. It is stated that the averments made in para 6 that the applicants were informed that Sale schedule be held under Notice dated 02.08.2018 did not take place and advised them to repay the due and to redeem the property and that in the meantime, issued another Sale Notice dated 05.10.2018 scheduling the sale on 26.10.2018 are true and correct. But the further averments that the reserve price was unilaterally reduced to Rs. 21 Crores when the applicants were in constant touch with this respondent for settlement and that this had misinformed that it is a routine formality and they do not have any bidders and had advised the applicants to not to file any proceedings before DRT as the same would spoil the relationship and settlement process and that even after 26.10.2018, the applicants were encouraged to bring an investor to pay the due and redeem the property are totally false, highly untenable and without any basis.

3.9. It is stated that the allegations are totally imaginary and invented for the purpose of the case. It is submitted that the despite receiving all statutory notices, the applicants were callous and not bothered to take any steps for settling the dues and in fact was threatening the officials with dire consequences and to refrain from recovery proceedings. It is submitted that despite several odds and challenges, the secured asset was sold to the 2nd Respondent after complying all legal formalities.

3.10. It is stated that the averments made in para 7 that the 2nd applicant had any accidental fall and sustained injuries and was advised bed rest and due to the said reasons was unable to either mobilize funds or identify investor or purchaser to settle the dues are all totally false and without any basis. It is submitted that the alleged fall is imaginary and doctor certificate is concocted and fabricated for the purpose of the case.

3.11. It is stated that the averments made in para 8 that as if the applicants came to know of the Sale of the property when this respondent had filed Part Satisfaction Memo dated 02.01.2019 in O.A. No. 179/2018 and that the reserve price was schemingly reduced without any justification and that due to his ill health was unable to meet the advocate on time and was able to meet him only on 17.01.2019 are all denied as totally false and without any basis. The further allegations that purchaser failed to pay the sale consideration within the time is also false and misleading. It is submitted that the property was sold for Rs. 21.01 Crores in the public auction held on 26.10.2018 and the 2nd Respondent had paid Rs. 2.10 Crore being the 10% of the EMD amount by DD and the same was credited in the account on 29.10.2018. The 2nd Respondent had transferred the balance 15% amount being Rs. 3,15,25,000/- on the same day. It is submitted that the balance 75% amount is to be paid within 15 days i.e., 10.11.2018. However, the 2nd Respondent had requested time and virtue of the powers vested in Authorised Officer had granted time and the 2nd Respondent had remitted the amounts on the following dates

3.12. It is submitted that the amounts in any case has been paid within 3 months as per Rule 9(4) of the SI(E) Rules, 2002 and therefore there is no transgression or illegality.

3.13. It is stated that there is no undervaluation as alleged by the applicants and the same are totally irrelevant and misleading.

3.14. It is stated that the allegations made in para 10 that this respondent failed to give publication of the sale to be held on 26.10.2018 in leading Newspapers having wide circulation as it is evident that there was only a sole bidding and the entire sale was conducted to facilitate the 2nd Respondent to purchase the property to paltry sum are all denied as totally false and without any basis. It is submitted that since the Sale schedule to be held on 10.09.2018 under Sale Notice dated 02.08.2018 failed, the 1st Respondent had issued second notice dated 05.10.2018 fixing the date of sale as 26.10.2018. The said Sale Notices were published in New Indian Express and Dinamani newspapers on 06.10.2018.

3.15. It is stated that one of the primary allegations that in view of non registration of Security Interest with the Central Registry, the entire proceedings is vitiated is untenable and unsustainable. It is submitted that the Security Interest has been duly registered with the Central Registry of Securitization Asset Reconstruction and Security Interest of India and the proof of which are filed herewith.

3.16. It is stated that legality of the Demand Notice and the Possession Notice has already been upheld by Hon'ble DRT-II, Chennai in S.A. No. 44/2017 and the applicants also clearly admitted the debt and liability.

3.17. It is stated that the that the applicant is also not entitled for any of the grounds mentioned in the above SA and the same are all denied as false, untenable, unsustainable and without basis.

3.18. It is stated that the applicant is a willful defaulter and have not approached this Hon'ble Tribunal with clean hands and they are not entitled for any relief. It is stated that the ARC had strictly followed the procedure contemplated under the & Rules diligently and there are no transgressions or violations.

3.19. It is stated that the first respondent diligently followed all rules and procedures contemplated under the and Rules and there is no illegality or impropriety in any of the proceedings. It is submitted that there are no tangible issues raised by the applicant and the above application is totally devoid of merits and has to be dismissed with exemplary costs. Thus contending, Ld. Counsel for the first respondent prayed the Tribunal to dismiss the application with costs.

3.20. Ld. Counsel for the 1st respondent relied upon the following documents in support of his case.

a) CERSAI Registrations

b) Auction Sale Notice dated 5.10.2018

c) Photos evidencing affixture of Sale Notice

d) Notice to Applicants dated 8.10.2018

e) Postal Receipts dated 8.10.2018

f) Acknowledgment Cards

g) Publication in New Indian Express English Daily dated 6.10.2018

h) Publication in Dinamani Tamil Daily dated 6.10.2018

i) Correspondences

j) Statement of accounts

4. In the light of the aforesaid contentions, the Tribunal framed the following point for consideration:

Whether the sale of the application schedule mentioned property held on 26.10.2018, is not in conformity with the mandatory provisions of the SARFAESI Act and the Rules made thereunder If so, can the same be set aside

Heard both sides, perused the record, the written submissions and the case law.

5. POINT.

Whether the sale of the application schedule mentioned property held on 26.10.2018, is not in conformity with the mandatory provisions of the SARFAESI Act and the Rules made thereunder If so, can the same be set aside

5.1. At the outset, it is to be stated that though the secured creditor has been given the right to enforce the security interest without the intervention of the Court or Tribunal, the secured creditor while enforcing the security interest shall invariably comply the provisions of the SARFAESI Act and the Rules made thereunder, lest, if noncompliance is established, the Tribunal can set aside the measure.

5.2. Reliance in this regard is paced on the ruling of Hon'ble Supreme Court of India, in re Mathew Vargheese Vs. M. Amritha Kumar and others 2014 (5) SCC P-610 (paragraph 24), wherein it was held:

"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"

5.3. Availing of credit facilities by the applicant from the first respondent bank, creation of security interest over the application schedule mentioned property by the applicant to serve the same as security for the due discharge of the credit facilities availed by the applicant is not in dispute. However, the applicants seriously questioned the validity of the sale held on 26.10.2018 in pursuance of the sale notice dated 5.10.2018 and the consequential acts of the 1st respondent, inter alia, contending that the same is not in conformity with the mandatory provisions of the SARFAESI Act and the rules made thereunder.

5.4. The main grounds raised in the application are as follows:

I Though the first respondent since failed to register the security interest created in its favour by the borrower in terms of Section 26(D) of SARFAESI Act, before the Central Registry, enforcement of Security Interest by the first respondent is unsustainable and is liable to be set aside.

II The two newspapers in which the sale notice dated 5.10.2018 has been published are not having sufficient circulation in the locality where the property is situate, as such, the sale held in pursuance of the said sale notice is not sustainable.

III The reserve price fixed by the Authorised Officer since based on the valuation report dated 9.7.2018, which was obtained for issuance of earlier sale notice dated 2.8.2018 in respect of the sale scheduled on 10.9.2018, the Authorised Officer acted in breach of Rule 8(5) of SI(E) Rules, 2002, as such, the sale is liable to be set aside.

IV The sale had been conducted in deviation to the Terms and Conditions of Sale.

V The Authorised Officer received sale consideration from the second respondent in breach of Rule 9(3) and 9(4) of SI(E) Rules, 2002 and the terms and conditions of sale.

5.5. The aforesaid contentions are refuted strongly by the Ld. Counsel for the first respondent, inter alia, contending that the first respondent has meticulously followed the provisions of the SARFAESI Act and the Rules made thereunder while enforcing the measure impugned in this application. Ld. Counsel also placed reliance on the following documents.

1. CERSAI Registrations

2. Auction Sale Notice dated 5.10.2018

3. Photos evidencing affixture of Sale Notice

4. Notice to Applicants dated 8.10.2018

5. Postal Receipts dated 8.10.2018

6. Ack Cards

7. Publication in New Indian Express English Daily dated 6.10.2018

8. Publication in Dinamani Tamil Daily dated 6.10.2018

9. Correspondence between the applicant and the first respondent dated 12.11.2018, 14.11.2018, 10.12.2018, 11.12.2018 and 20.12.2018.

10. Extract of payments received from the auction purchaser for the period between 1.4.2016 to 31.7.2019

5.6. I shall now proceed to examine contentions aforesaid.

I Non compliance of Section 26(D) of SARFAESI Act

5.7. A perusal of Section 26(D) of SARFAESI Act, which is as follows, reveals that the secured creditor shall not be entitled to exercise the rights of enforcement of securities under Chapter III unless the security interest created in its favour by the borrow has been registered with the Central Registry.

"26D Right of enforcement of securities:- Notwithstanding anything contained in any other law for the time being in force, from the date of commencement of the provisions of this Chapter, no secured creditor shall be entitled to exercise the rights of enforcement of securities under Chapter III unless the security interest crated in its favour by the borrower has been registered with the Central Registry"

5.8. The first respondent filed a photocopy of CERSAI Report dated 12.7.2019 issued by the Central Registry. A perusal of the same discloses that the security interest created over the subject property on 2.12.2013 has been duly registered and the name of the 1st respondent is shown as charge holder. The genuineness of the said certificate is not disputed. I therefore find no reason to disbelief this document. Therefore, compliance of Section 26(D) of SARFAESI Act stands established by the first respondent.

II The two newspapers in which the sale notice was published are not having sufficient circulation in the locality

5.9. According to the applicants, the two newspapers wherein the sale notice was published are not having sufficient circulation in the locality wherein the subject property is situate.

5.10. There can be no dispute that Rule 8(6) of Security Interest (Enforcement) Rules, 2002 as it stood when the impugned sale notice dated 5.10.2018 has been issued mandates that the two newspapers, wherein the sale notice shall be published, one English and the other of vernacular language shall be having sufficient circulation in the locality.

5.11. While it is the contention of the applicants that two newspapers namely English newspaper 'Indian Express" and the vernacular newspaper 'Dinamani' in which the sale notice was published are not having wide circulation in the area where the subject property is situate, the first respondent would contend that both the newspapers are having wide circulation in the area where the subject property is situate.

5.12. In support of the plea that the two newspapers are not having sufficient circulation, the applicants filed a photocopy of the abstract of "highest circulated newspapers" by ABC Member Publications by Audit Bureau of Circulation and contended that as per the same, both Indian Express and Dinamani cannot be considered as newspapers having sufficient circulation.

5.13. Here it is to be stated that the object behind insisting publication in newspapers having wide circulation in the locality where the property is situate especially when it comes to publication of sale notice is concerned, is to attract large volume of bids so that bidding would be competitive and would fetch good price for the property intended to be sold.

5.14. The newspapers viz. Indian Express and Dinamani are undoubtedly well known newspapers especially in South India. A bare perusal of the abstract of circulation of newspapers amongst ABC member publications would disclose that these statistics are in respect of ABC Member Publications only and not that of all the newspapers. The applicants have not placed any record to show that Indian Express and Dinamani are also members of ABC Member Publications, therefore, no reliance can be placed on the said abstract. Moreover, possession notice in this case was also published in the same newspapers and the applicants had never raised similar objection in respect of the same. Therefore, the Tribunal is not inclined to accept the plea that Indian Express and Dinamani are not leading newspapers having wide circulation in the locality where the mortgaged property was situate.

III Fixation of Reserve Price - Non compliance of Rule 8(5) of the Security Interest (Enforcement) Rules, 2002.

5.15. Ld. Counsel for the applicants assailed the reserve price fixed by the Authorised Officer, in this case mainly on two grounds viz.

a) that no fresh valuation report has been obtained by the Authorised Officer for the purpose of fixing the reserve price for the sale held on 26.10.2018 despite it is mandatory to obtain the same.

b) that the reserve price arrived at by the Authorised Officer is too low and does not reflect the correct market or distress value.

(a) that no fresh valuation report has been obtained by the Authorised Officer for the purpose of fixing the reserve price for the sale held on 26.10.2018 despite it is mandatory to obtain the same.

5.16. Insofar as the first limb of the challenge is concerned, Ld. Counsel for the applicants would contend that for the purpose of fixing the reserve price in respect of the impugned sale, the authorized officer relied upon the valuation report dated 9.7.2018, which was obtained in respect of the earlier sale notice dated 2.8.2018, which sale, did not take place. According to the Ld. Counsel it is mandatory to obtain a valuation report whenever a sale notice is issued, however, the said rule has been breached by the 1st respondent, as such, the sale held based on the valuation report obtained in respect of an earlier sale is not sustainable and the sale therefore is liable to be set aside.

5.17. Refuting the contention that Rule 8(5) of SI(E) Rules is breached, Ld. Counsel for the first respondent placed reliance on the valuation report dated 9.7.2018 and contended that the said valuation report which has been obtained just prior to issuance of the sale notice dated 5.10.2018 is proper and in fact reflects the proper value of the subject property besides in accordance with the relevant mandatory provisions of the, as such, there is no breach of Rule 8(5) of SI(E) Rules, 2002.

5.18. Before I proceed with my discussion further, I feel it useful to refer to Rule 8(5) of SI(E) Rules, which is as follows;

(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.

5.19. A bare perusal of the aforesaid rule reveals that the Authorised Officer shall obtain a report from the approved valuer in respect of for the property intended to be sold and fix the reserve price, in consultation with the secured creditor.

5.20. The Division Bench of Hon'ble Telangana and Andhra Pradesh High court in re, M/s. Pochiraju Industries Ltd. vs. Punjab National Bank and Others reported in 2018 (1) DRTC 904, while setting aside the sale, in para 32 observed as follows:

"The reserve price of Rs. 17,25,00,000/- in the impugned e-auction sale notice dated 01.07.2017, based on either the earlier valuation report dated 01.02.2017 or the internal valuation report dated 27.06.2017, therefore cannot be sustained. It was mandatory for the bank to secure a fresh valuation from an approved valuer in terms of Rule 8(5) of the Rules of 2002 before issuing a fresh sale notice, after the earlier sale notice dated 14.03.2017 came to naught. In consequence, the auction sale held on 24.07.2017, on the strength of this invalid reserve price in the e-auction sale notice dated 01.07.2017, cannot also be sustained."

5.21. The factual aspects of this case, insofar as the same relate to fixing of reserve price is concerned, are akin to in re, M/s. Pochiraju, supra, as the reserve price for the sale scheduled under the impugned sale notice was admittedly based on the report dated 9.7.2018 which was obtained for fixing the reserve price of the property intended to sell under the sale notice dated 2.8.2018 and no fresh valuation report for the impugned sale has been obtained. Therefore, insofar as the present sale is concerned, it being a fresh sale notice after the earlier sale notice came to a naught, it is mandatory for the Authorised Officer to obtain a fresh valuation report from the valuer which the 1st respondent bank failed to obtain. Therefore, the reserve price fixed by the 1st respondent in respect of the sale held on 26.10.2018 cannot be accepted.

(b) that the reserve price arrived at by the Authorised Officer is too low and does not reflect the correct market or distress value.

5.22. Coming to the second limb of challenge to the reserve price fixed by the Authorised Officer, Ld. Counsel for the applicants strangely pleased that the reserve price fixed by the 1st respondent was very low and does not reflect the true and correct value. Ld. Counsel also relied on the sale certificate dated 25.1.2019 executed by Canara Bank vide document No. 540 of 2019 in favour of the purchaser in an auction sale held under the SARFAESI Act and contended that the Canara bank has sold the property of an extent of 450.50 cents (equivalent to 196418 Sq.ft.) in Inner Ring Road, Madhavaram, Chennai - 600060, which is in a much interior locality at Rs. 55,60,00,000/- i.e. at Rs. 2830.70 per sq.ft. as per the No. 540 of 2019, whereas the 1st respondent has sold the subject property to the second respondent at Rs. 1705.60 per sq.ft. even while the prevailing guideline value was Rs. 2345/- per sq.ft.

5.23. Refuting the said contention, Ld. Counsel for the first respondent vehemently contended that the earlier attempt by the first respondent vide sale notice dated 2.8.2018 for sale of the subject property on 10.9.2018 whereunder the reserve price was fixed at Rs. 25.00 crores did not fructify, therefore, in respect of the subject sale, the reserve price was fixed at Rs. 21.00 crores by taking all relevant factors into consideration. Insofar as the plea that if the guideline value in respect of the subject property is taken into consideration the subject property would be of much higher value than Rs. 21.00 crores, Ld. Counsel for the first respondent submitted that the guideline value is a rate fixed by the Authority under the Stamp Act for the purpose of determining the true market value of the property disclosed in an instrument requiring payment of stamp duty and the same has nothing to do with fixation of market price of the property. The valuer who is approved and competent had taken all the factors into consideration while fixing the distress value, therefore, the contention that the reserve price arrived at by the Authorised Officer is low and does not reflect the correct market value is unsustainable.

5.24. A bare perusal of the valuation report dated 9.7.2018 relied on by the Authorised Officer for the purpose of fixing the reserve price in this case, reveals that the valuer after having observed that the marketability of the property is good, fixed the value of the subject property as on 2.7.2018, as follows:

a) Total value of land, building, etc. at Rs. 27.67 crores

b) Realisable value of the property at Rs. 24.00 crores

c) Distress value of the property at Rs. 20.00 crores

d) The guideline value of the property is Rs. 29.13 crores

5.25. Therefore, even as per report of the valuer the marketability of the property is good and as per the guideline value of the property, it would fetch Rs. 29.13 crores. Indisputably, the subject property was sold at a price much below the guideline value. Therefore, even if the first respondent's contention that the guideline value is fixed only for the purpose of determining the true market value of the property disclosed in an instrument requiring payment of stamp duty is accepted, yet, it cannot be denied that the true market value of the property in respect of the subject property shall be Rs. 29.13 crores, as per the guideline value. Hence, the reasoning adopted by the valuer for discarding the guideline value and opting his own value, in the considered opinion of the Tribunal, is unconvincing and untenable. That apart, even after discarding the guideline value, the valuer even while declaring the marketability of the property is good, while arriving at the realizable value has further reduced the market value from Rs. 27.67 crores to Rs. 24.00 crores and then fixed the distress value at Rs. 20.00 crores after further deduction of Rs. 4.00 crores from the so called realizable value. As no tenable reason has been stated for this drastic reduction in the saleable value of the property, the value as arrived at by the valuer cannot be accepted.

5.26. The sale certificate executed by the Canara Bank for the property situated in the same village discloses that market value of the said property as Rs. 55,60,00,000/-, however, as no is record placed before the Tribunal to show that the property covered by the said sale certificate and the subject property are identically situated, the Tribunal is not inclined to place much reliance on the same.

5.27. Now coming to the other submission of Ld. Counsel for the 1st respondent that as the earlier attempt made by the first respondent to sell the subject property fixing the reserve price at Rs. 25.00 crores since failed for want of bids and as the applicants failed to make payment despite accepting the OTS proposal, the first respondent had no alternative but to dispose of the securities under the SARFAESI Act by slightly reducing the reserve price from Rs. 25.00 crores to Rs. 21.00 crores, as such, the primary intention of the first respondent is to recover huge amount of public money from the applicants, it cannot be said that the impugned measure is not in conformity with the provisions of the SARFAESI Act and the Rules made thereunder. It is to be stated that no doubt it is true that as the earlier sale scheduled 10.9.2018 failed the first respondent has issued a fresh sale notice and was able to sell away the property by way of public auction held on 26.10.2018. But the hardship and the difficulties faced by the first respondent in enforcing the securities for realizing its dues cannot be a ground to circumvent the mandatory procedure.

5.28. In this regard reliance can be placed on the ruling of the Division Bench of Hon'ble Telangana and Andhra Pradesh High Court in re, Pochiraju Industries Ltd., supra, wherein it is held as follows:

"No doubt, the bank may have attempted time and again to sell the petitioner company's properties, but its failure in doing so does not justify its action in cutting short the due procedure and resorting to reiteration of an earlier reserve price, without lawful foundation to support the same. "

5.29. Hon'ble Supreme Court of India in re, J. Rajiv Subramaniyan and Ors. vs. Pandiyas and Ors. (2014) 5 SCC 651 , wherein it is held that.

"It must be emphasized that generally proceedings under the SARFAESI Act, 2002 against the borrowers are initiated only when the borrower is in dire-straits. The provisions of the SARFAESI Act, 2002 and the Rules, 2002 have been enacted to ensure that the secured asset is not sold for a song. It is expected that all the banks and financial institutions which resort to the extreme measures under the SARFAESI Act, 2002 for sale of the secured assets to ensure, that such sale of the asset provides maximum benefit to the borrower by the sale of such asset".

5.30. Hon'ble Supreme Court of India, in re, Ram Kishun Vs. State of Uttar Pradesh, 2012 11 SCC 511 held that

"undoubtedly public money should be recovered and recovery should be made expeditiously. But, it does not mean that 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 an any unreasonable or arbitrary manner in flagrant violation of the statutory provisions."

5.31. Here, I may also usefully quote Article 300A of the Constitution of India, which says

"No person shall be deprived of his property, save by authority of law:"

5.32. Hon'ble Supreme Court of India In re, Lachman Dass, 2008 (1) SCC p. 125, 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 the Statute".

5.33. In the light of my discussion above and the legal frame referred supra, the Tribunal hereby declares that the reserve price arrived at by the Authorised Officer is not in conformity with the mandatory Rule 8(5) of the SI(E) Rules.

IV Sale had been conducted in deviation of the Terms and Conditions of Sale.

5.34. According to the Ld. Counsel for the applicants while the terms and conditions of sale mentioned in the sale notice and published in the English newspaper categorically state under clause 12 that successful bidder shall deposit 25% of the bid amount including EMD immediately and/or not later than next working day and the balance 75% of the amount must be payable within 15 days and on failure to pay the sale price as stated, all deposits including the EMD shall be forfeited without further notice, the Authorised Officer had granted nearly two months' time to the second respondent to deposit the balance 75% of the sale price, as such, the impugned sale being violative of condition 12 of the terms and conditions of sale is liable to be set aside.

5.35. Per contra, Ld. Counsel for the first respondent submitted that though the sale notice served on the applicants and published in the English newspaper did state that the successful bidder shall deposit the balance 75% of the sale price within 15 days, lest, all the deposits including EMD will be forfeited. The clause enabling extension of time has been provided in the terms and conditions of sale published in the vernacular newspaper wherein clause 12 states "that successful bidder shall deposit 25% of the bid amount including EMD immediately and/or not later than next working day and the balance 75% of the amount must be payable within 15 days and on failure to pay the sale price as stated, all deposits including the EMD shall be forfeited without further notice, however, under extraordinary circumstances, time for paying the balance 75% of sale price shall be extended subject to the decision of the Authorised Officer", as such, it cannot be said that the authorized officer conducted the sale in violation of terms and conditions of sale.

5.36. Nextly, Ld. Counsel for the first respondent submitted that clause 18 of terms and conditions of sale published in both the newspapers clearly state that "the sale shall be subject to rules/conditions prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002". As sub-rule (4) of Rule 9 provides for extension of time, it cannot be said that sale held in favour of the second respondent was in breach of the terms and conditions of sale. Thus submitting, Ld. Counsel prayed to reject the plea of the applicants that the sale has taken place in deviation of the terms and conditions of the sale published.

5.37. There cannot be any dispute that the terms and conditions of sale published in the English newspaper as well as the notice served on the applicants categorically disallowed extension of time for payment of balance 75% of the sale price beyond 15 days and despite the said categorical term, the Authorised Officer had granted extension of time to the second respondent and ultimately received the entire balance sale consideration within 53 days after the confirmation of sale. However, this action is justified by the Ld. Counsel for the first respondent by relying on clause 18 of the terms and conditions which states that "The sale shall be subject to rules/conditions prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002" and also under Clause 12 of terms and conditions of sale notice published in vernacular newspaper stating therein "however, under extraordinary circumstances, time for paying the balance 75% of sale price shall be extended subject to the decision of the Authorised Officer" extension of time cannot be termed as breach of terms and conditions of sale or the provisions of the SARFAESI Act.

5.38. At the outset, it is to be stated that this submission of the Ld. Counsel for the first respondent cannot be accepted except for the limited purpose that unlike under sub-rule (3) of Rule 9 of SI(E) Rules, the legislature has provided for extension of time for deposit of balance 75% of sale price. At the same time, the legislature has expressly excluded the role of the authorized officer insofar as the same relates to extension of time for payment of the balance 75% of the sale price and conferred such power exclusively on the secured creditor which can be exercised by way of a written agreement with the purchaser.

5.39. Therefore, in the light of the statutory position, when clause relating to extension of time as contained in the sale notice published in vernacular newspaper is examined, the irresistible conclusion that one can draw is that the said clause as published is in contradiction with the rule 9(4) of SI(E) Rules, 2002 besides a case of express waiver of right of extension of time available in terms of Rule 9(4) of SI(E) Rules, 2002.

5.40. Hon'ble Supreme Court of India in re, Vasu P. Shetty Vs. Hotel Vandana Palace and others held in para 17, as follows:

"17….The Court held that it is a settled position in law that even if a provision is mandatory, it can always be waived by a party (or parties) for whose benefit such provision has been made. The provision in Rule 9(1) being for the benefit of the borrower and the provisions contained in Rule 9(3) and Rule 9(4) being for the benefit of the secured creditor (or for the benefit of the borrower), the secured creditor and the borrower can lawfully waive their rights"

5.41. Since the first respondent has not disputed condition No. 12 of the terms and conditions of sale published in English newspaper and also that contained in the sale notice served on the applicants, the plea of express waiver of the right of extension of time stands further established.

V. First respondent received sale price from the second respondent beyond stipulated time limit

5.42. Before, I proceed with my further discussion on this point, I feel it useful to refer herein to the terms as to the deposit of sale price as contained in clause 12 of the sale notice dated 5.10.2018, published in English and vernacular language newspapers, besides rule 9(3), 9(4) of 9(5) of SIE Rules, which are as follows.

(i) condition No. 12 of Terms and conditions of Sale

"A successful bidder shall deposit 25% of the bid amount including EMD immediately but not later than next working day and the balance 75% of the amount must be payable within 15 days. On failure to pay the sale price as stated, all deposits including the EMD shall be forfeited without further notice"

(ii) Rule (3) of SI(E) Rules, 2002

9(3) On every sale of immovable property, the purchaser shall immediately i.e. on the same day or not later than next working day, as the case may be, pay a deposit of twenty five per cent of the amount of sale price which is inclusive of earnest money deposited, if any, to the authorised officer conducting the sale and in default of such deposit, the property shall be sold again.

Rule 9(4) of SI(E) Rules, 2002

9(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period (as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding three months)

Rule 9(5) of SI(E) Rules, 2002

"9(5) In default of payment within the period mentioned in sub-rule (4) the deposit shall be forfeited (to the secured creditor) and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold."

5.43. The burden is on the first respondent to establish that the payments received from the second respondent in this case are in conformity with the terms of sale as well as the relevant provisions of the SARFAESI Act and the Rules made thereunder.

5.44. A perusal of the sub-rules 3 & 4 of Rule 9 of SI(E) Rules, 2002 state that the bidder who has been declared as successful is required to pay the sale price in two stages. The first stage is when the bid submitted by the highest successful bidder along with EMD amount is accepted by the Authorised Officer the successful bidder shall deposit 25% of the sale price and the next stage is when the sale in favour of the successful bidder is confirmed by the Authorised Officer, he shall deposit the balance 75% of the sale price. While time for payment of 25% of sale price cannot be extended, time for balance 75% of sale price can be extended subject to fulfilling the conditions laid down in sub-rule (4) of Rule 9 of SI(E) Rules, 2002.

(i) Deposit of 25% of Sale price

5.45. Since the Ld. Counsel for the applicants strenuously contended that the first respondent accepted the sale consideration from the second respondent/auction purchaser in breach of the terms and conditions of sale notice dated 5.10.2018 besides Rule 9(3) of SI(E) Rules, 2002, even though the respondents denied the same in their counter, this Tribunal directed both the respondents to produce documentary proof showing deposit of 25% of sale price, the date of sale i.e. on 26.10.2018.

5.46. Pursuant thereto, the first respondent produced photocopy of the demand draft dated 24.10.2018 for Rs. 2.10 crores being the EMD for the bid submitted by the second respondent and the electronic statement of account of the first respondent showing receipt of balance amount of Rs. 3,15,25,000/- by way of RTGS from the second respondent. The second respondent also filed its statement of account disclosing the transfer of Rs. 3,15,25,000/- on 26.10.2018 from its account. Copies of these documents were served on the Ld. Counsel for the applicants and the applicants have not filed any rebuttal to the same.

5.47. As the documentary proof placed by the respondents clinchingly establishes compliance of Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 by the second respondent, as such, the contention of the applicants that Rule 9(3) has been breached by the respondents is devoid of any force, hence, rejected.

(ii) Deposit of balance 75% of sale price

5.48. Ld. Counsel for the first respondent while strongly refuting the plea of the applicants that the 75% balance sale price was accepted beyond the time stipulation, stated that the subject property was sold for a sum of Rs. 21.01 crores in a public auction held on 26.10.2018 and that the second respondent while submitting its bid paid the 10% EMD amount of Rs. 2.10 crores by way of a demand draft which was duly received by the first respondent by 26.10.2018. It is stated that the second respondent after having been declared as successful bidder, transferred by RTGS the balance 15% of the 25% of sale price on 26.10.2018 itself. Thus, on the date of sale, the second respondent paid 25% of the sale price, as mandated under the rules and terms of sale. Hence, the sale in favour of the 2nd respondent has been confirmed. Insofar as the payment of balance 75% of the sale price which was payable within 15 days from the date of confirmation of sale is concerned the second respondent sought for extension of time for making payment of balance 75% of the sale price vide its letter dated 12.11.2018 by 45 to 60 days and the first respondent vide its letter dated 14.11.2018 had informed the second respondent that time has been extended by 30 days from 12.11.2018 for deposit of the balance 75% of the sale price. Pursuant thereto, the second respondent after making part payment, once again, vide its letter dated 10.12.2018 sought for further extension of time till 31.12.2018 for deposit of balance sale price amount. In response thereto, the first respondent vide its letter dated 11.12.2018 informed the second respondent that the competent authority have allowed further time upto 24.12.2018 for deposit of the balance amount of Rs. 12,75,75,000/- and the second respondent deposit the same by 20.12.2018. Thus, the entire sale price of Rs. 21.01 crores has been paid by the second respondent within the time extended, as such, there is no breach of Rule 9(4) of SI(E) Rules, 2002 and the second respondent also filed the extract of the ledger account showing the payments made and received by the first respondent.

5.49. According to the Ld. Counsel for the second respondent there is no truth in the allegation of the applicants that the second respondent has made payments in breach of the terms and conditions of sale. According to the Ld. Counsel, the second respondent's bid of Rs. 21.01 crores being the highest, was accepted by the first respondent in the auction sale that took place on 26.10.2018 and the second respondent was called upon to pay balance 15% amount and accordingly the second respondent deposited the balance amount on 26.10.2018 itself. Having received the 25% of the sale price, the first respondent confirmed the sale and asked the second respondent to pay the balance 75% of the sale price within 15 days from 29.10.2018. However, the second respondent after making part payments asked for extension of time vide its letter dated 12.11.2018 and 10.12.2018 for remitting the balance amount and the said requests were accepted by the first respondent vide its letter dated 14.11.2018 and 11.12.2018 and accordingly the entire sale price was paid by the second respondent by 20.12.2018. Thereafter, the first respondent had issued the sale certificate in favour of the second respondent.

5.50. As discussed already, unlike the Rule 9(3), the rule 9(4) of SI(E) Rules enable extension of time for deposit of 75% of the balance sale price, however, by complying Rule 9(4) of SI(E) Rules. Rule 9(4) of SI(E) Rules lays down that any extension of time beyond 15 days from the date of confirmation of sale for payment of balance 75% of the sale price shall be by way of written agreement between the purchaser and the secured creditor and the period of extension shall not exceed 3 months.

5.51. Admittedly, the second respondent has not deposited the entire balance 75% of sale price within 15 days from the date of confirmation of sale and the extension of time was sought after making paltry payment of Rs. 2.1 crores vide letter dated 12.11.2018 for a period of 45 to 60 days. This request of the 2nd respondent was accepted by the Authorised Officer vide his letter dated 14.11.2018 granting further 30 days time from 12.11.2018 to 12.12.2018. This letter however does not speak of any written agreement whatsoever between the secured creditor and the 2nd respondent for extension of time as it only says that "as you sought for time for payment, we allow you to pay the balance amount to conclude the sale within further 30 days from 12.11.2018 on or before 12.12.2018". Moreover neither of the respondents have pleaded entering into any written agreement for extension of time between the secured creditor and the 2nd respondent, as envisaged under Rule 9(4) of SI(E) Rules. The letters of the first respondent dated 14.11.2018 or 11.12.2018 also does not say that the extension of time for deposit of balance sale price has been granted in pursuance of a written agreement between the 2nd respondent and the secured creditor.

5.52. Here it would be apt to refer to the ruling of the Division Bench of Hon'ble High Court of Telangana, in re, Smt. P. Sudha Lakshmi vs. Bank of India, reported in 2018 2 DRTC 800, speaking through Hon'ble Justice V. Ramasubramanian (as the Lordship then was) wherein it was held in para 17, as follows:

17 …..Let us assume for a minute that the Bank was ignorant of the interpretation given by the Supreme Court to the word parties. Even then, the Bank should have at least had an agreement in writing with the auction purchaser, since even without the interpretation of law given by the Supreme Court, this necessity was there by way of statutory prescription. But it is not the case of the Bank, in their counter affidavit that they had an agreement in writing at least with the auction purchaser. Hence, there is a clear violation of the statutory prescription in the manner in which the sale was confirmed.

5.53. Needless to mention herein that neither the SARFAESI Act nor the rules made thereunder empower the Authorized Officer to extend the time for deposit nor the purchaser to enter into an agreement with the Authorized Officer for extension of time for deposit of the full or part of the 75% sale price. On the contrary, when the law and rules mandate that the extension of time for payment of 75% of the balance sale consideration shall be by entering into a written agreement between the secured creditor and the purchaser.

5.54. Reliance in this regard can be placed on the judgment of the Hon'ble Supreme Court of India in Gujarat Urja Vikas Nigam Limited Vs. ESSAR Power Limited 2008 4 SCC 755 held that,

"when a statute provides for a thing to be done in a particular manner, then, it has to be done in that manner and in no other manner.

5.55. The Division Bench of Hon'ble High Court of Madras, in Sheeba Philominal Merlin and Ors. vs. The Repatriates Co-op Finance and Development Bank Ltd., held that;

"The Security Interest (Enforcement) Rules, 2002, have been framed under the powers conferred by Sub-section (i) and Clause (b)(ii) of Sub-section (2) of Section 38 read with Sub-Sections (4), (10) and (12) of Section 13 of the SARFAESI Act 2002 and therefore, the said rules are subordinate legislation and they have force on the statute

"It has been held by the Apex Court in Tamilnadu Electricity v. Status Spinning Mills Ltd. Reported in 2008 (7) SCC 353 that subordinate legislation validly made may have to be read in the same manner as if it is part of the."

5.56. Thus, when the statute has empowered the secured creditor alone to extend time for deposit of balance 75% of sale price beyond 15 days by way of a written agreement, the said power should be exercised accordingly. The role of the authorized officer (1st respondent herein) in granting extension of time for payment of balance 75% of the sale price when expressly excluded, the extension of time granted by authorized officer in this case is ultra vires the provisions of the and is unsustainable under law.

5.57. In an identical situation, the Division Bench of Hon'ble High Court of Telangana, in re, Smt. P. Sudha Lakshmi vs. Bank of India, reported in 2018 2 DRTC 800, speaking through Hon'ble Justice V. Ramasubramanian (as the Lordship then was) held in paras 14 to 18, as follows:

14. The expression parties appearing in Rule 9(4) was interpreted by the Supreme Court in Sri Siddeshwara Cooperative Bank Ltd. v. Ikbal to mean (i) the secured creditor, (ii) the borrower and (iii) the auction purchaser. In order to get over the said interpretation, the word parties was substituted by the words purchaser and the secured creditor by an amendment to the rules that came into effect on 04-11-2016.

15. Keeping the above statutory provision in mind, let us come back to the facts of the present case, as projected by the 1st respondent/Bank. In paragraph-10 of the counter affidavit, the 1st respondent has stated as follows:

10. It is submitted that the E Auction was conducted on 29-10-2015. The auction purchaser paid the EMD of Rs. 5.00 lakhs on 23-10-2015 and deposited 25% of the bid amount including after deducting the EMD on 05-11-2015 with Boduppal Branch and kept with sundries. In view of the interim orders in W.P. No. 37565 of 2015, the Sale Confirmation letter was issued on 09-11-2015 and the auction purchaser paid 75% of the bid amount on 29-01-2016 and bank has issued Sale Certificate subsequently and registered the same. It is humbly submitted that there is no irregularity in conducting the auction and the allegations contra are not true.

16. From the portion of the counter affidavit extracted above, it is clear that there were two violations. They are:

(i) that the purchaser paid 25% of the bid amount only after seven days viz., on 05-11-2015 despite the auction having been conducted on 29-10-2015 and (ii) that the purchaser paid the balance 75% after 50 days viz., on 29-01-2016, though the Sale Confirmation Letter was issued on 09-11-2015.

17. Thus, there is a clear violation of two prescriptions one contained in sub-rule (3) and another contained in sub-rule (4) of Rule 9. It is pertinent to note that before the 2016 amendment to the rules, any extension of time beyond a period of 15 days from the date of confirmation of sale, for the payment of the balance 75%, should be by way of an agreement in writing between the parties. In this case, the Bank does not even plead, at least for the sake of formality that there was any agreement in writing between the Bank and the auction purchaser. As a matter of fact, by virtue of the interpretation given by the Supreme Court in Sri Siddeshwara Cooperative Bank Ltd. V. Ikbal to the words parties appearing in Rule 9(4), the Bank ought to have entered into a tripartite agreement in writing with the borrower and the auction purchaser. Since the declaration of law made by the Supreme Court in the said case was made on 22-8-2013 (date of judgment in Siddeshwara case) and since the auction in this case was conducted only after the said date i.e., on 29-10-2015, the Bank is expected to know the law and the Bank should have entered into a tripartite agreement on 09-11-2015, the date of issue of the confirmation letter or at least on 24-11-2015 the date of expiry of 15 days from the date of confirmation, for the grant of extension of time up to 29-01-2016. Let us assume for a minute that the Bank was ignorant of the interpretation given by the Supreme Court to the word parties. Even then, the Bank should have at least had an agreement in writing with the auction purchaser, since even without the interpretation of law given by the Supreme Court, this necessity was there by way of statutory prescription. But it is not the case of the Bank, in their counter affidavit that they had an agreement in writing at least with the auction purchaser. Hence, there is a clear violation of the statutory prescription in the manner in which the sale was confirmed.

6. Therefore, in view of the discussion as above and taking into consideration the submissions of the Ld. Counsel for both sides and on careful perusal of the entire record, this Tribunal, without any hesitation, I hereby declare that mandatory Rule 8(5) and 9(4) of SIE Rules are breached by the 1st respondent, as such, the sale held on 26.10.2018 in favor of the 2nd respondent by the 1st respondent is liable to be set aside. Accordingly, the sale held on 26.10.2018 in favor of the 2nd respondent is hereby set aside.

6.1. In Badrinath v. State of Tamil Nadu and Ors. AIR 2000 SC 3243 , the Apex Court observed that

"once the basis of a proceeding is gone, all consequential acts, actions, orders would fall to the ground automatically and this principle of consequential order which is applicable to judicial and quasi-judicial proceedings is equally applicable to administrative orders".

6.2. I therefore hereby set aside all the consequential acts including issuance of sale certificate dated 24.12.2018 in favour of the 2ndrespondent. Since the sale is set aside, the first respondent is directed to return the sale price of Rs. 21,01,00,000/- to the second respondent with interest at 12% per annum (simple) from the date of deposit of the money till the date payment.

7. In the result, SA is allowed and it is hereby declared that;

• the auction sale held on 26.10.2018 by the 1st respondent pursuant to the sale notice dated 5.10.2018 in favour of the second respondent is not conformity with the mandatory provisions of the SARFAESI Act and the Rules made thereunder, as such the same is hereby set aside.

• Consequently, the sale certificate dated 24.12.2018 issued by the first respondent in favour of the second respondent in respect of the application scheduled mentioned property is also hereby set aside.

• As the sale in favour of the second respondent ban is set aside, the first respondent is directed to return the sale price of Rs. 21,01,00,000.00 to the second respondent with interest at 12% per annum (simple) from the date of deposit of the money till the date payment.

• Since the sale in favor of the second respondent is set aside, the second respondent shall not claim any right, title or interest over the subject property.

8. There shall be no order as to costs.

9. Communicate a copy of the order to the parties concerned in terms of Rule 16 read with Rule 2(c) of DRT (Procedure) Rules, 1993.

(Dictated to PA(SN), transcript revised, corrected and pronounced in the virtual court held through video conference on this 7th Day of September, 2020).