2016 (10) TMI 204 - HC - Indian Laws

Court nullifies E-auction sale for lack of notice compliance under SARFAESI Act. Refund granted, creditor can proceed if unpaid.

The court declared the E-auction sale dated 14.03.2016 null and void due to non-compliance with the mandatory 30-day notice requirement, as per the ... E-auction sale validity - E-auction sale was held contrary to the mandate of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘SARFAESI Act’) - Held that:- When there is no 30 days gap from date of publication on 13.02.2016 to date of sale held on 14.03.2016, the sale held is liable to be set aside by declaring as null and void. Accordingly and in the result, the Writ Petition is allowed : a) By declaring the E-auction sale dated 14.03.2016, covered by E-auction sale notice dated 10.02.2016, that was published in Eenadu Telugu Daily News Paper dated 13.02.2016 as null and void. b) In this regard, coming to the rights of the auction purchaser, as laid down in Mathew Varghese [2015 (1) TMI 461 - SUPREME COURT ] the auction purchaser is entitled to refund of the amount deposited by him along with interest at 18%p.a. from the date of each such deposit, from the secured creditor bank, so as to recover from the debtor as part of the amount of the secured loan due. c) Needless to say that remedy is left open as laid down in Mathew Varghese supra for the secured creditor bank to proceed afresh for sale of the property by public auction or the like as per the due procedure under law, if the writ petitioner/Debtor fails to liquidate the debt as per the right of redeeming the debt available till transfer of the property by public auction and registration. d) Copy of this order shall be marked to the District Registrar, Kurnool, of Kurnool District, for effecting necessary cancellation and changes in his records in terms of Section 31(2) of the Specific Relief Act, 1963. Issues Involved:1. Validity of the E-auction sale dated 14.03.2016.2. Compliance with the mandatory provisions of the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002.3. Maintainability of the writ petition despite the availability of alternative remedies.Detailed Analysis:1. Validity of the E-auction sale dated 14.03.2016:The petitioner challenged the E-auction sale dated 14.03.2016, arguing it was held contrary to the SARFAESI Act provisions. The petitioner claimed that the sale notice dated 10.02.2016, published on 13.02.2016, did not provide the mandatory 30 days clear notice required by Rule 9(1) of the Security Interest (Enforcement) Rules, 2002. The court analyzed the dates and found that there was no clear 30 days gap between the publication date and the auction date, thus violating the mandatory requirement. Consequently, the E-auction sale was declared null and void.2. Compliance with the mandatory provisions of the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002:The petitioner contended that the bank did not serve the demand notice and possession notice as required under Sections 13(2) and 13(4) of the SARFAESI Act. The court examined the procedural compliance and found that the bank failed to provide a clear 30 days notice between the publication date and the auction date. The court emphasized that strict adherence to the procedural requirements is necessary to protect the borrower's rights. The court referred to the Supreme Court's decision in Mathew Varghese v. M. Amritha Kumar, which held that any sale without complying with the mandatory 30 days notice is null and void.3. Maintainability of the writ petition despite the availability of alternative remedies:The respondent bank argued that the writ petition was not maintainable as the petitioner had an alternative remedy under Section 17 of the SARFAESI Act to approach the Debt Recovery Tribunal (DRT). However, the court held that when there is an allegation of violation of mandatory provisions, the writ petition is maintainable as an exceptional case. The court cited the Supreme Court's decision in General Manager, Sri Siddeshwara Cooperative Bank Limited and Anr. v. Ikbal & Ors, which stated that the availability of an alternative remedy is not an absolute bar for exercising the writ jurisdiction under Article 226 of the Constitution of India. The court concluded that the writ petition was maintainable due to the alleged statutory violations.Conclusion:The court allowed the writ petition, declaring the E-auction sale dated 14.03.2016 as null and void for not complying with the mandatory 30 days notice requirement. The auction purchaser was entitled to a refund of the deposited amount with interest. The secured creditor bank was permitted to proceed afresh for the sale of the property if the petitioner failed to liquidate the debt. The court directed the District Registrar, Kurnool, to effect necessary cancellations and changes in the records. The court emphasized the importance of strict compliance with the procedural requirements under the SARFAESI Act to protect the borrower's constitutional right to property.