SARFAESI private treaty sale invalid for breach of mandatory notice and sale procedure; sale set aside as void

Private treaty sale of a secured asset under the SARFAESI framework was invalid because the secured creditor did not comply with the mandatory notice and sale requirements under Section 13 of the Act and Rules 8 and 9 of the 2002 Rules. The Court treated strict adherence to the statutory scheme as essential, and noted that no written agreement fixed the terms for a private treaty sale. As the borrower was denied the statutory protection, the sale could not stand and was declared null and void. The sale was set aside, and the purchasers were directed to return possession on receipt of the amounts ordered to be refunded.

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Issues: Whether the sale of the secured asset by private treaty without written terms and without compliance with the statutory notice and sale requirements under the SARFAESI framework was valid, and what relief followed from such invalidity.

Analysis: The sale was held to have been effected in breach of the mandatory procedure under Section 13 of the SARFAESI Act and Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002. The borrower was not given the protection contemplated by the statute, and there was no written agreement settling the terms of sale by private treaty as required for a sale other than public auction or public tender. The secured creditor was treated as bound to act strictly in accordance with the statutory scheme, and a sale made in disregard of those requirements could not stand.

Conclusion: The sale was held to be null and void and was set aside; the purchasers were directed to return possession upon receipt of the amounts directed to be refunded.

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