TaxTMI 
TaxTMI 
2009 (11) TMI 500
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.... length. 3. It is necessary to note that the petition was heard at length yesterday, viz., 11th November, 2009, and as the court working hours were over the matter was kept overnight part heard with intimation to the learned advocates that the matter shall be proceeded with peremptorily at 10.30 AM. Learned advocate for respondent No. 1-Bank, who was addressing the court on 11th November, 2009 when the day was over has not turned up when the matter has been called out and a request for passing over the matter has been turned down in the circumstances. It is necessary to also note that at 11.30 AM. when the court commenced the judgment after hearing learned advocate for respondent No. 2 and learned senior advocate appearing for the petitioner in rejoinder, learned advocate for respondent-bank is yet absent. Thereafter, when the judgment was almost over learned advocate turned up and informed that the matter had been transferred to another learned advocate and, hence, he did not remain present. No appearance has been filed by any other advocate and none has remained present. 4. The petitioners herein are directors of one private limited company by the name of Zarf Dairy (P.) Lt....
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....ale in favour of the prospective buyer and made a counter-offer for a sum of Rs. 2.18 crore. The petitioners also reiterated the offer made by the company to settle the account at a sum of Rs. 2.25 crore. However, on 10th August, 2009 respondent-bank rejected the offer of the petitioners and also rejected the offer of one time settlement made by the company. According to respondent-bank, the offer made by the petitioners did not disclose the payment schedule and did not offer a reasonable amount and, hence, the rejection. At this stage the petition has been preferred. 6. Learned senior advocate appearing for the petitioners initially assailed the act of respondent-bank in rejecting the offer made by the petitioners submitting that no valid reasons were advanced for rejecting the highest offer made by the petitioners and the property of the petitioners could not be disposed of for a lesser amount as the respondent-bank was trying to do. It was also contended that respondent-bank had failed to comply with statutory requirements of rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 ('the Rules') inasmuch as no notice under sub-rule (6) of rule 8 of the Rules had been ....
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....s. 3 lakh to the tune of Rs. 2.18 crore was not acceptable to the bank and the bank was within its right to reject such improved bid. Referring to the further affidavit-in-reply dated 3rd November, 2009 it was submitted that the bank had received a total sum of Rs. 2.15 crore from the prospective buyer and, therefore, the rejection vide communication dated 10th August, 2009 was justified. Learned advocate for the respondent-bank also referred to the communication addressed to the Police Inspector, Vejalpur Police Station, Ahmedabad by the manager of respondent-bank on 9th February, 2009 to contend that not only there was no nco-operation from the borrower and/or the petitioners but in fact the manager of respondent-bank was being threatened. This was referred to for the purpose of emphasising the conduct of respondent-bank in not accepting the offer made by the petitioners. 8. On behalf of respondent No. 2, who claims to be the purchaser of the property (albeit incorrectly), it was contended that respondent No. 2 had made the entire payment and the cheques tendered by respondent No. 2 were encashed by respondent No. 1-bank as accepted in further affidavit filed by the bank on 3r....
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....ing been mentioned. The bank could have called upon the petitioners to furnish such a schedule, or the bank could have informed the petitioners that the prospective buyer has already made payment in full on 3rd August, 2009 and, hence, if the petitioners intended to outbid prospective buyer the petitioners should make an upward offer and make payment immediately. The bank did nothing of the sort and vide communication dated 10th August, 2009 not only rejected the revised offer made by the petitioners at Rs. 2.18 crore but also rejected the offer made by the company to settle the account for a sum of Rs. 2.25 crore. This conduct does not indicate that the decision making process on the part of respondent-bank was governed by prudent norms of a seasoned banker. In fact the action seems to be based on some other consideration than interest of the bank. If the borrower was ready and willing to make the payment of Rs. 2.25 crore to settle the account the bank was required to negotiate further in this direction and not dispose of the property for a lesser amount of Rs. 2.15 crore. Assuming for the sake of argument that the payment schedule proposed by the borrower and/or the petitioners ....
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....red creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods : (a)by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets ; or (b)by inviting tenders from the public ; (c)by holding public auction ; or (d)by private treaty. (6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5) : Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include, - (a)The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor ; (b)the secured debt for recovery of which the property is to be sold ; (c)reserve price, below which the property may not be sold ; (d)time and place of public auction ....
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....e (2) of rule 8 of the Rules in two leading newspapers. Sub-rules (3) and (4) of rule 8 of the Rules stipulate that the authorised officer, as a custodian of the property, shall take steps to take care of the property as an owner of ordinary prudence would, and such preservation and protection shall be continued till the secured asset is sold or otherwise disposed of. 13. Under sub-rule (5) of rule 8 of the Rules it is provided that before effecting a sale of the immovable property referred to in sub-rule (1) of rule 8 of the Rules the authorised officer shall - (i) obtain a valuation of the property from an approved valuer ; (ii) fix the reserve price of the property in consultation with the secured creditor ; and (iii) thereafter sell the whole or any part of the property by any of the methods prescribed in clauses (a) to (d). Sub-rule (6) of rule 8 of the Rules enjoins upon on authorised officer to mandatorily serve the borrower a notice of 30 days for sale of immovable secured asset under sub-rule (5) of rule 8 of the Rules. The Proviso thereunder stipulates that in case of sale being effected by either inviting tenders from the public or by holding public auction, the secur....
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....t out in Appendix IV of the Rules. Appendix-IV relatable to possession notice referred to in rule 8(1) of the Rules provides for a notice of having taken over possession of an immovable property and does not relate to a notice for taking over possession. In other words, the notice is post the event of taking over of possession and not a notice prior to taking over of possession. This becomes abundantly clear from paragraph No. 2 of the prescribed format which says notice is hereby given to the borrower and the public in general that the undersigned had taken possession of the property indicating that the possession having been taken over the parties are put to notice. The next paragraph makes it clear that the borrower and the public in general are cautioned against dealing in the property in question as the same is subject to the charge of the secured creditor. Thus, the notice envisaged by sub-rule (1) of rule 8 of the Rules is not a notice for sale of the property but is a notice for the purpose of cautioning the borrower and the public in general that the possession now vests with the secured creditor and no person may deal with the said property. Therefore, the contention on b....
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....of the Rules would have to contain basic details to enable the borrower to better such offer upon private negotiation. The secured creditor, who is a financial institution, cannot be permitted to conduct itself like a private trader. All its acts have to be transparent and when challenged the record must reveal such transparency. 19. In the present case, admittedly, the respondent-bank put up the property for auction sale by issuing the public notice. Even if one may concede, for the sake of argument, that having issued a public notice there was sufficient compliance with requirement of sub-rule (6) of rule 8 of the Rules yet when one peruses the public notice issued in the newspaper on 10th January, 2009 it becomes clear that the statutory requirement of notice period of 30 days remains unfulfilled. The advertisement was published on 10th January, 2009, last date for receiving the offers was 20th January, 2009 and last date for opening the tenders was 2lst January, 2009. The dates clearly speak for themselves that the period was only 10 days. Therefore, even the contention, on behalf of the respondent-bank, that there was substantial compliance with the requirement of the provi....
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....gard. 23. Similarly, the second proviso to sub-rule (2) of rule 9 of the Rules is also indicative of the fact that the borrower has to be kept informed at all stages where the property is to be disposed of, on failure of an auction procedure, when the authorised officer intends to sell the property below reserve price. 24. In this context the contention raised on behalf of respondent No. 2 based on Madras High Court judgment in case of M.M. Gupta ( supra) requires to be considered. In the said case it was not a case of putting up the property for auction sale but was a sale to one of the parties by way of a private treaty considering the fact that the said party had a right of pre-emption and was in the possession of the property in question. This is apparent when one reads the circumstances considered to be mitigating circumstances, as set out in paragraph 7 of the judgment. Hence, the said judgment cannot support the case of respondent No. 2. 25. Similarly, reference to judgment of Madhya Pradesh High Court in case of Smt. Godawari Shridhar v. Union Bank of India AIR 2009 MP 13, made at a belated stage, also cannot carry the case of respondent No. 2 any further. Suffice ....
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....09 all that is stated is the amount has been received from respondent No. 2 and the bank is holding the said sum. There is no statement at any stage in the stand adopted by respondent-bank that the sale has been confirmed. 29. This has to be also considered and appreciated in context of the fact that notice was issued by the High Court on 17th August, 2009 making it returnable on 20th August, 2009 and on said day learned advocate appearing for respondent-bank only prayed for time to file counter-affidavit. If the sale had been confirmed, as contended by respondent No. 2, respondent-bank would have categorically made the statement in this regard. To the contrary respondent-bank permitted an order of status quo qua the subject property being made by the court indicating that no confirmed sale had taken place and the matter was only at the stage of consideration. Hence, this contention raised on behalf of respondent No. 2 also does not merit acceptance. 30. In light of what is stated hereinbefore, it is apparent that the contentions raised on behalf of respondent-bank based on provisions of section 17 of the Securitisation Act also need not come in way insofar as the petition is....