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Judgment
1.Heard Mr. KK Bhatra, learned counsel for the petitioner and also Mr. SK Goswami, learned counsel for the respondent.
On 27.09.2007, the petitioner Bank had extended the facility of cash credit limit of Rs.150 lacs and a bank guarantee of Rs.46.69 lacs in favour of
the respondent. The said facility of cash credit limit and bank guarantee was secured by creating equitable mortgage of certain properties of the
respondent and of the guarantors. On 31.12.2010, the loan account of the respondent was classified as a non-performing asset (NPA).
In the resultant situation, a demand notice dated 24.01.2011 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (in short SARFAESI Act) was served on the respondent calling him to pay a sum of Rs.1,88,28,279/-,
along with interest at the contractual rate as per the terms and conditions of the loan documents, with further requirement to discharge the liabilities
within 60 days from the date of the notice. On 09.04.2011, the petitioner Bank served another notice dated 09.04.2011, calling upon the respondent to
handover/surrender the secured assets. On 12.04.2011, the respondent made a representation against the notice under Section 13(2) of the
SARFAESI Act, but the same was rejected on 19.04.2011 for the reason of being made beyond that statutory period prescribed for the purpose.
On 18.12.2012, the petitioner Bank took symbolic possession of the secured assets and a valuation was done through an approved valuer, who
submitted his report on 20.12.2012. Accordingly the possession notice dated 18.12.2012 was published on 24.12.2012 and 25.12.2012 respectively, in
two different local newspapers, as required under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 (in short Enforcement Rules).
The possession notice dated 18.12.2012, issued under Section 13(4) of SARFAESI Act was assailed by the respondent by filing an application
under Section 17(1) of the said Act on 30.01.2013 before the Debt Recovery Tribunal, Guwahati (in short, DRT Guwahati), which was numbered as
SA No.2/2013, which, amongst others, had a prayer to declare the action of the petitioner Bank undertaken under Section 13(4) of the SARFAESI
Act to be illegal and void.
The petitioner Bank issued an auction sale notice on 22.02.2013 fixing 29.03.2013 to be the date of auction, which was duly published in two local
newspapers on 26.02.2013 as required under Rule 9(1) of the Enforcement Rules. The said auction sale notice was assailed by the respondent through
an interim application in the SA Appeal No.2/2013, which was registered as MA No.11/2013. The petitioner Bank submitted a written objection by
taking a stand that it would be more appropriate to file a separate appeal against the auction sale notice of 22.02.2013 under Section 17(1) of the
SARFAESI Act.
Subsequently, the date of auction was deferred to 30.03.2013, but the bidding process failed for want of bidders. In the resultant situation a fresh e-
auction sale notice dated 28.05.2013 was issued fixing 29.06.2013 for sale of the secured asset. The respondent filed another interim application
registered as MA No.66/2013, assailing the valuation report dated 18.12.2012 as well as alleging violation of Rule 8 of the Enforcement Rules. It is
stated that by the order 26.06.2013 MA No.66/2013 was dismissed.
As regards the MA No.11/2013, it is noticed that the prayer made therein was for setting aside the sale notice dated 22.02.2013, with an interim
prayer for keeping it in abeyance till the decision in SA No.2/2013. By an order of 22.05.2013, the DRT Guwahati had refused the interim order
prayed for in MA No.11/2013 by fixing subsequent dates for filing of evidence, etc.
As the respondent had not handed over the physical possession of the secured assets, an application under Section 14 of the SARFAESI Act was
filed by the petitioner Bank before the Additional District Magistrate, Kamrup(M) and, accordingly, took physical possession of the secured assets on
12.07.2013 in the presence of the Executive Magistrate and other authorities.
Subsequently, the respondent filed Petition No.148/2014 alleging violation of the procedure prescribed under the Enforcement Rules as regards
taking of possession of the secured assets. Another petition No.408/2014 was filed by the respondent for declaring the e-auction sale conducted on
29.06.2013 to be null and void, inasmuch as, there was a violation of Rule 9 of the Enforcement Rules.
In the aforesaid premises, the SA No.2/2013 was given a final consideration by the DRT, Guwahati by the order dated 30.01.2015 and proceeded
on the basis of it being an application under Section 17(1) of the SARFAESI Act. In the order of 30.01.2015, the DRT, Guwahati also takes note of
the petition No.148/2014 and records that although the e-auction was conducted on 29.06.2013, but the 25% of the bid amount was deposited on
02.07.2013, which was in violation of the provisions of Rule 9(3) of the Enforcement Rules. Thereafter, in the order of 30.01.2015, the DRT Guwahati
by referring to certain judgments was of the view that judicial notice of subsequent events brought on record through miscellaneous applications can
be taken by the Tribunal and arrives at a conclusion that prima facie, there is a violation of Rule 9(3) and 9(4) of the Enforcement Rules. Further the
DRT Guwahati rejected the contention of the petitioner Bank that only the issues raised in the SA application should be decided and the subsequent
events of auction sale etc., should not be adjudicated. Upon adjudication, the DRT Guwahati had arrived at a conclusion that the e-auction having been
held on 29.06.2013, the 25% of the amount was required to be deposited on 01.07.2017 and as such there was a violation of Rule 9(3) of the
Enforcement Rules. Accordingly, the auction sale dated 29.06.2013 and the resultant sale certificate issued on 01.08.2013 were declared to be null
and void.
Against the order dated 30.01.2015, an appeal was carried by the petitioner Bank before the Debts Recovery Appellate Tribunal at Kolkata (in
short, DRAT, Kolkata) which was registered as Appeal No.14 of 2015. A final consideration was given to the said appeal by the judgment and order
dated 04.07.2017 in which, a decision of the Hon’ble Supreme Court in General Manager, Sri Siddeshwara Cooperative Bank Limited & Anr.
â€"vs- Iqbal and others reported in (2013) 10 SCC 83 was taken into consideration wherein, it was held that Rule 9(3) and 9(4) of the Enforcement
Rules are mandatory. Accordingly, it was ordered that the auction sale dated 29.06.2013 and the sale certificate dated 01.08.2013 are null and void.
Against the appellate order dated 04.07.2017 of the DRAT, Kolkata and the order 30.01.2015 of the DRT Guwahati, the present writ petition has
been preferred by the petitioner Bank.
In course of the hearing of the present writ petition, the only ground urged upon by Mr. K.K. Bhatra, learned counsel for the petitioner Bank is
that against the auction sale dated 29.06.2013 and the resultant sale certificate dated 01.07.2013, the respondent ought to have preferred a separate
SARFAESI application under Section 17(1) of the SARFAESI Act and both the DRT Guwahati as well as the DRAT Kolkata, could not have
adjudicated upon its validity in the S.A. No.2/2013.
The petitioner Bank has taken a stand that the Bank having raised an objection to that effect when the M.A. No.11/2013 and M.A. No.148/2014
were preferred, both the DRT Guwahati and DRAT, Kolkata ought to have adjudicated upon it.
But what is noticeable is that although it is the stand of the petitioner Bank that by the order of 22.05.2013 M.A. No.11/2013 was dismissed, but its
perusal reveals that by the said order the interim prayer for the auction sale notice was refused, and the main prayer for setting aside the auction
notice was kept open for further adjudication by requiring the parties to file their evidence. Although a further stand has been taken in paragraph 15 of
the writ petition that the Petition No.148/2014 was dismissed by the order 28.03.2013, but the same also appears to be incoherent as a petition of 2014
cannot be dismissed by an order of 2013 and nor any such order has been brought on record.
Be that as it may, the order dated 30.01.2015 of the DRT clearly reveals that the M.A. No.148/2014 was also given a consideration in its order
dated 30.01.2015 by arriving at a conclusion that subsequent events can also be adjudicated upon by the Tribunal in a pending application under
Section 17(1) of the SARFAESI Act. The petitioner Bank neither in the writ petition nor in its contentions raised at the time of hearing has projected
their case assailing the said conclusion of the DRT Guwahati to be incorrect and more so when the DRT had given its reasons by referring to certain
principles of law laid down by the Hon’ble Supreme Court to that effect.
But what would be of further relevance would be to examine the conclusion of the DRT Guwahati as well as DRAT Kolkata as to whether the
auction sale that had taken place on29.06.2013, where the 25% of the value was paid on 02.07.2013, would constitute a valid auction sale in view of
the provision of Rule 9(3) of the Enforcement Rules.
Rule 9(3) of the Enforcement Rules is as follows:-
“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 percent of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorized officer
conducting the sale and in default of such deposit, the property shall be sold again.â€
A perusal of Rule 9(3) of the Enforcement Rules reveals that twenty five percent of the auction sale shall be deposited by the purchaser on the
same day itself or not later than the next working day and the consequence of default of such deposit would be that the property shall be sold again.
The very expression ‘not later than the next working day’ indicates a mandatory outer limit within which the twenty five percent deposit can be
made. Further the consequence of such default having been provided in the Rule itself that the property shall be sold again, also is an indication that
the provisions of Rule-9(3) are mandatory in nature.
The Hon’ble Supreme Court in its judgment and order in General Manager, Sri Siddeshwara Cooperative Bank Limited & Anr. â€"vs- Iqbal
and others reported in (2013) 10 SCC 83 in paragraph 19 had held as under:-
“19. There is no doubt that Rule 9(1) is mandatory but this provision is definitely for the benefit of the borrower. Similarly, Rule 9(3) and Rule 9(4)
are for the benefit of the secured creditor (or in any case for the benefit of the borrower). It is 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 that matter for the
benefit of the borrower), the secured creditor and the borrower can lawfully waive their right. These provisions neither expressly nor contextually
indicate otherwise. Obviously, the question whether there is waiver or not depends on the facts of each case and no hard-and-fast rule can be laid
down in this regard.â€
As held by the Hon’ble Supreme Court in paragraph-19 of Sri Siddeshwara Cooperative Bank Limited (Supra), Rule-9(3) of the Enforcement
Rules are mandatory in nature, but, they can be waived by the secured creditor and the borrower, but to that extent there definitely must be material to
indicate that there was such a waiver. In the instant case, no such material has been produced by the petitioner Bank or by the respondent that the
mandatory period prescribed under Rule-9(3) of the Enforcement Rules had been waived by them.
In view of the above, no infirmity can be found in the conclusion of the DRT, Guwahati in its order dated 30.01.2015 and DRAT, Kolkata in its
order dated 04.07.2017 that the auction sale of 29.06.2013 and the sale certificate of 01.07.2013 are vitiated and unsustainable for there being a
violation of the procedural requirements of Rule-9(3) of the Enforcement Rules.
As the substantive conclusion of the DRT, Guwahati and the DRAT, Kolkata being in conformity with the provisions of Rule-9(3) of the
Enforcement Rules, we are of the view that the orders dated 30.01.2015 and 04.07.2017 do not warrant an interference.Accordingly the writ petition
is found devoid of merit and the same is dismissed.
It is stated by Mr. K.K Bhatra, learned counsel for the respondent Bank that in the meantime the securitization of the loan account of the
respondent had been approved in another proceeding before the DRT and the appeal against the same had also been dismissed, resulting in the matter
being presently before the Recovery Officer of the DRT,Guwahati. In the circumstance, the Recovery Officer may proceed with the matter including
the aspect of holding a fresh sale of the secured asset strictly as per law.